The post Income Statement under NFRS | Balance Sheet under NFRS | P&S 1 appeared first on EP Online Study.
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Income Statement under | Profit or Loss Statement | Problems and Solutions
An income statement shows the net result of the business operations during an accounting period.
It may include manufacturing account, trading account, profit and loss account.
Income statement presents the summary of revenues, expenses and net income or net loss of a firm.
It serves as a profitability measure of the firm.
The amount received from operating activities is known as revenue income.
It is the income earned from goods selling or services provide.
It also includes received of discount, commission, interest, transfer fees etc.
Expenditure is incurred for the running productivity or earning capacity of a business.
Such expenditure yields benefits in current accounting period.
Balance Sheet under | Statement of Financial Position under | Problems and Solutions
Balance sheet is a statement of assets and liabilities of a business organization.
It shows financial position in an accounting period.
It is a statement summarizing the financial position of firm.
The balance sheet is prepared at the end or accounting period.
It is prepared after preparation income statement (manufacturing account, trading, profit and loss account).
It is the statement of balances of ledger account, which are not included in income statement.
Therefore, it is called the balance sheet.
The balance sheet contains assets and liabilities.
Liabilities refer to the financial obligation of an enterprise.
Assets refer to tangible or intangible rights owned by an enterprise.
Problems and Solution of Financial Statement under NFRS
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 3A
EP LLC has following accounts balance on 31 December 2020:
|
Ledgers |
Amount $ |
Ledgers |
Amount $ |
|
Account receivable |
58,151 |
Accrued expenses |
22,000 |
|
Inventories |
46,000 |
8%Bank loan |
74,000 |
|
Cost of goods sold |
150,000 |
Account payable |
13,000 |
|
Cash balance |
670 |
Opening retained earnings |
13,000 |
|
Advertisement expenses |
18,000 |
Sales revenue |
254,000 |
|
9% Investment |
65,000 |
Common stock |
90,000 |
|
Patents |
7,000 |
Accumulated depreciation |
7,800 |
|
Income tax expenses |
6,009 |
Interest income |
5,850 |
|
Notes receivable |
9,000 |
|
|
|
Salaries expenses |
13,000 |
|
|
|
Land and building |
39,000 |
|
|
|
Depreciation expenses |
3,900 |
|
|
|
Dividend paid |
9,000 |
|
|
|
Rent expenses-office |
30,000 |
|
|
|
Rent expenses-warehouse |
19,000 |
|
|
|
Interest expenses |
5,920 |
|
|
|
|
479,650 |
|
479,650 |
Required: (a) Multiple step income statement under NFRS; (b) Statement of retained earnings;
(c) Classified balance sheet under NFRS
[Answer: (a) NIAF = $14,021; (b) R/E = $18,021; (c) B/S = $217,021]
SOLUTION
Profit or Loss Statement under NFRS
EP LLC
For the year ended 31st March 2021
|
Particulars |
Notes |
Amount |
Amount |
|
|
Net sales revenue |
|
|
254,000 |
|
|
Less: |
Cost of goods sold* |
|
|
(150,000) |
|
|
Gross profit |
|
|
104,000 |
|
Add: |
Other income (interest income) |
|
|
5,850 |
|
Less: |
Operating expenses: |
|
|
|
|
|
Salaries expenses |
|
13,000 |
|
|
|
Depreciation expenses |
|
3,900 |
|
|
|
Rent expenses-office |
|
30,000 |
|
|
|
Advertisement expenses |
|
18,000 |
|
|
|
Rent expenses-warehouse |
|
19,000 |
(83,900) |
|
|
Profit from operation |
|
|
25,950 |
|
Less: |
Financial expenses: |
|
|
|
|
|
Interest expenses |
|
|
(5,920) |
|
|
Profit before tax |
|
|
20,030 |
|
Less: |
Income tax expenses |
|
|
(6,009) |
|
|
Profit from continuing operations |
|
|
14,021 |
|
Add: |
Profit from discontinued operation after tax |
|
|
Nil |
|
|
Net profit after tax |
|
|
14,021 |
Retained Earnings Statement
EP LLC
As on 31st March 20XX
|
Particulars |
Amount $ |
Amount $ |
|
|
|
Beginning balance |
|
13,000 |
|
Add: |
Net income after tax |
|
14,021 |
|
|
Total income available |
|
27,021 |
|
Less: |
Dividend paid |
|
(9,000) |
|
|
Ending balance |
|
18,021 |
Statement of Financial Position as per NFRS
EP LLC
As on 31st March 2021
|
Particulars |
Notes |
Year 2021 |
|
|
ASSETS |
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
Land and building Accumulated depreciation-L&B |
1 |
39,000 (7,800) |
|
|
9% Investment |
|
65,000 |
|
|
Patents |
|
7,000 |
|
|
Total non-current assets (A) |
|
103,200 |
|
Current Assets: |
|
|
|
|
|
Cash and bank |
|
670 |
|
|
Account receivable |
|
58,151 |
|
|
Notes receivable |
|
9,000 |
|
|
Inventories |
|
46,000 |
|
|
Total current assets (B) |
|
113,821 |
|
|
TOTAL ASSETS (A+B) |
|
217,021 |
|
EQUITY |
|
|
|
|
|
Common stock |
|
90,000 |
|
|
Additional paid in capital |
|
Nil |
|
|
Retained earnings |
|
18,021 |
|
|
Total Equity |
|
108,021 |
|
LIABILITIES |
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
8% Bank loan |
|
74,000 |
|
|
Other non-current liabilities |
|
Nil |
|
|
Total non-current liabilities (a) |
|
74,000 |
|
Current Liabilities: |
|
|
|
|
|
Accrued expenses |
|
22,000 |
|
|
Account payable |
|
13,000 |
|
|
Total current liabilities (b) |
|
35,000 |
|
|
Total Liabilities (a+b) |
|
109,000 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
217,021 |
alternatively:
|
1. Land and building |
39,000 |
|
|
|
|
Less: Accumulated depreciation |
(7,800) |
|
|
|
|
|
31,200 |
|
|
|
Click on book cover for Free eBooks
#####
|
Click on link for YouTube videos |
|
|
Accounting for Share |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
|
|
Final Accounts in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
|
Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 3B
AM Company Ltd has following trial balance on 31 March 2021:
|
Debit |
Amount $ |
Credit |
Amount $ |
|
Cash |
4,469 |
Accumulated depreciation on PPE |
3,000 |
|
Account receivable |
2,000 |
Notes payable |
3,200 |
|
Inventory |
3,000 |
Account payable |
5,800 |
|
Prepaid expenses |
1,500 |
Accrued payroll |
2,750 |
|
Property, plant and equipment (PPE) |
30,000 |
Advance on sales (deferred revenue) |
6,250 |
|
Brands and trademark |
20,000 |
Other current liabilities |
5,000 |
|
Investment in government bond |
5,000 |
Long-term debt |
10,500 |
|
Cost of goods sold |
15,000 |
Other non-current liabilities |
9,500 |
|
Selling expenses |
1,125 |
10% Preferred stock |
5,000 |
|
Interest expenses |
2,000 |
Common stock |
10,000 |
|
Income tax expenses |
201 |
Retained earnings (1 April 2020) |
6,000 |
|
Cash dividend on preferred stocks |
500 |
Additional paid in capital |
1,000 |
|
Cash dividend on common stocks |
20% |
Net sales |
21,000 |
|
Salaries expenses |
2,540 |
Gain on sales of machine |
1,000 |
|
Phone and internet expenses |
665 |
|
|
|
|
90,000 |
|
90,000 |
Required: (a) Multiple step income statement under NFRS; (b) Statement of retained earnings;
(c) Classified balance sheet under NFRS
[Answer: (a) NIAT = $469; (b) R/E = $3.969; (c) B/S = $62.969]
SOLUTION
Profit or Loss Statement under NFRS
AM Company Ltd
As on 31st March 2021
|
Particulars |
Notes |
Amount $ |
Amount $ |
|
|
Net sales revenue |
|
|
21,000 |
|
|
Less: |
Cost of goods sold* |
|
|
(15,000) |
|
|
Gross profit |
|
|
6,000 |
|
Add: |
Other income (gain on machinery) |
|
|
1,000 |
|
Less: |
Operating expenses: |
|
|
|
|
|
Salaries expenses |
|
2,540 |
|
|
|
Phone and internet expenses |
|
665 |
|
|
|
Selling expenses |
|
1,125 |
(4,330) |
|
|
Profit from operation |
|
|
2,670 |
|
Less: |
Financial expenses: |
|
|
|
|
|
Interest expenses |
|
|
(2,000) |
|
|
Profit before tax |
|
|
670 |
|
Less: |
Income tax expenses |
|
|
(201) |
|
|
Profit from continuing operations |
|
|
469 |
|
Add: |
Profit from discontinued operation after tax |
|
|
Nil |
|
|
Net profit after tax |
|
|
469 |
Retained Earnings Statement
AM Company Ltd
As on 31st March 2021
|
Particulars |
Notes |
Amount $ |
Amount $ |
|
|
|
Beginning balance |
|
|
6,000 |
|
Add: |
Net income after tax |
|
|
469 |
|
|
Total income available |
|
|
6,469 |
|
Less: |
Cash dividend on preferred stocks |
1 |
500 |
|
|
|
Cash dividend on common stocks (10,000 @ 20%) |
1 |
2,000 |
(2,500) |
|
|
Ending balance |
|
|
3,969 |
Statement of Financial Position as per NFRS
AM Company Ltd
As on 31st March 2021
|
Particulars |
Notes |
Year 2021 |
|
|
ASSETS |
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
Property, plant and equipment Accumulated Depreciation-PPE |
2 |
30,000 (3,000) |
|
|
Investment in government bond |
|
5,000 |
|
|
Brands and TM |
|
20,000 |
|
|
Total non-current assets (A) |
|
52,000 |
|
Current Assets: |
|
|
|
|
|
Cash and bank |
|
4,469 |
|
|
Account receivable |
|
2,000 |
|
|
Inventories |
|
3,000 |
|
|
Prepaid expenses |
|
1,500 |
|
|
Total current assets (B) |
|
10,969 |
|
|
TOTAL ASSETS (A+B) |
|
62,969 |
|
EQUITY |
|
|
|
|
|
Common stock |
|
10,000 |
|
|
Additional paid in capital |
|
1,000 |
|
|
Preferred stocks |
|
5,000 |
|
|
Retained earnings |
|
3,969 |
|
|
Total Equity |
|
19,969 |
|
LIABILITIES |
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
Long-term debt |
|
10,500 |
|
|
Other non-current liabilities |
|
9,500 |
|
|
Total non-current liabilities (a) |
|
20,000 |
|
Current Liabilities: |
|
|
|
|
|
Notes payable |
|
3,200 |
|
|
Account payable |
|
5,800 |
|
|
Accrued payroll |
|
2,750 |
|
|
Advance on sales |
|
6,250 |
|
|
Other current liabilities |
|
5,000 |
|
|
Total current liabilities (b) |
|
23,000 |
|
|
Total Liabilities (a+b) |
|
43,000 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
62,969 |
Given and working note:
|
1. Dividend on: |
|
|
2. Property, plant and equipment |
30,000 |
|
Common stocks $10,000 @ 20% |
2,000 |
|
Less: Accumulated depreciation |
(3,000) |
|
Preferred stocks $5,000 @ 10% |
500 |
|
|
27,000 |
###########
|
Click on link for YouTube videos: |
|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
###########
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PROBLEMS AND ANSWERS OF FINANCIAL STATEMENT UNDER NFRS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 3A
NTR Company Ltd has following trial balance on 31st March 2021:
|
Debit |
Amount $ |
Credit |
Amount $ |
|
Cash and cash equivalent |
6,500 |
Accumulated depn on equipment |
60,000 |
|
Account receivable |
30,115 |
Notes payable (due on April 2021) |
40,000 |
|
Inventories of merchandise |
35,000 |
Account payable |
39,575 |
|
Prepaid expenses |
15,000 |
Accrued payroll |
8,250 |
|
Equipment |
300,000 |
Advance on sales (deferred on revenue) |
61,750 |
|
Trademark and copyrights |
50,000 |
Other current liabilities |
21,000 |
|
Other current asset |
25,000 |
6% Long-term debt |
100,000 |
|
Land |
100,000 |
Other non-current liabilities |
15,000 |
|
Cost of goods sold |
150,000 |
Preferred stock |
90,000 |
|
Sales commission |
9,350 |
Common stock ($100 each) |
140,000 |
|
Salaries of office staff |
41,000 |
Retained earnings (1 April 2020) |
60,000 |
|
Depreciation expenses |
30,000 |
Additional paid in capital |
15,000 |
|
Interest expenses |
6,000 |
Net sales |
250,000 |
|
Advertisement expenses |
4,650 |
Interest on investment |
5,425 |
|
Income tax |
2,885 |
|
|
|
Cash dividend |
23,000 |
|
|
|
7% Investment |
77,500 |
|
|
|
|
906,000 |
|
906,000 |
Required: (a) Multiple step income statement under NFRS; (b) Statement of retained earnings;
(c) Classified balance sheet under NFRS
Answer: (a) NIAT = $11,540; (b) R/E = $48,540; (c) B/S = $579,115]
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The post Income Statement under NFRS | Balance Sheet under NFRS | P&S 1 appeared first on EP Online Study.
]]>The post Balance Sheet under NFRS | Statement of Financial Position under NFRS | Solution appeared first on EP Online Study.
]]>4. Balance Sheet under NFRS | Statement of Financial Position under NFRS | Solution
Final Accounts Prescribed by Company Act and Accounting Standard
All the limited company or LLC business organizations need to prepare financial statements on prescribed format of the company account and accounting standard.
Nepal Accounting Standard (NAS) has prescribed the formats for financial statements.
Nepal Financial Reporting Standards (NFRS) follows rules and regulation of NAS.
All the business organizations need to consider the prescribed format of the accounting standard for preparation and submission of final accounts.
Final accounts involve the following statements:
· Income Statement (Profit or Loss Statement)
· Balance sheet (Statement of Financial Position)
Balance Sheet unser NFRS | Statement of Financial Position unser NFRS
Balance sheet is a statement of assets and liabilities of a business organization.
It shows financial position in an accounting period.
It is a statement summarizing the financial position of firm.
The balance sheet is prepared at the end or accounting period.
It is prepared after preparation income statement (manufacturing account, trading, profit and loss account).
It is the statement of balances of ledger account, which are not included in income statement.
Therefore, it is called the balance sheet.
The balance sheet contains assets and liabilities.
Liabilities refer to the financial obligation of an enterprise.
Assets refer to tangible or intangible rights owned by an enterprise.
Statement of Financial Position under NFRS
ABC Company Ltd
For the year ended …………………
|
Particulars |
Notes |
Amount CY |
Amount LY |
|
|
ASSETS |
|
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
|
Property, plant and equipment |
|
xxxx |
xxxx |
|
|
Intangible assets |
|
xxxx |
xxxx |
|
|
Biological assets (long-term) |
|
xxxx |
xxxx |
|
|
Investment property |
|
xxxx |
xxxx |
|
|
Investment in associates* |
|
xxxx |
xxxx |
|
|
Other investment |
|
xxxx |
xxxx |
|
|
Long-term receivable (notes receivable) |
|
xxxx |
xxxx |
|
|
Deferred tax assets |
|
xxxx |
xxxx |
|
|
Total non-current assets (A) |
|
xxxx |
xxxx |
|
Current Assets: |
|
|
|
|
|
|
Inventories |
|
xxxx |
xxxx |
|
|
Trade receivable (debtor, B/R, A/R) |
|
xxxx |
xxxx |
|
|
Cash and cash equivalent |
|
xxxx |
xxxx |
|
|
Marketable securities |
|
xxxx |
xxxx |
|
|
Income tax receivable (refund of tax) |
|
xxxx |
xxxx |
|
|
Other receivables |
|
xxxx |
xxxx |
|
|
Asset held for sale (sell this year) |
|
xxxx |
xxxx |
|
|
Total current assets (B) |
|
xxxx |
xxxx |
|
|
TOTAL ASSETS (A+B) |
|
xxxxx |
xxxxx |
|
EQUITY |
|
|
|
|
|
|
Equity share capital (common stocks) |
|
xxxx |
xxxx |
|
|
Additional paid in capital (share premium, security premium) |
|
xxxx |
xxxx |
|
|
Preference share capital (preferred stock) |
|
xxxx |
xxxx |
|
|
Capital reserve |
|
xxxx |
xxxx |
|
|
General reserve |
|
xxxx |
xxxx |
|
|
Retained earnings |
|
xxxx |
xxxx |
|
|
Debenture redemption fund (loan repayment fund) |
|
xxxx |
xxxx |
|
|
Non-controlling interest (minority interest) |
|
xxxx |
xxxx |
|
|
Total Equity |
|
xxxxx |
xxxxx |
|
LIABILITIES |
|
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
|
Loan and borrowings (long-term) |
|
xxxx |
xxxx |
|
|
Employees benefits |
|
xxxx |
xxxx |
|
|
Government grants |
|
xxxx |
xxxx |
|
|
Derivative financial liabilities |
|
xxxx |
xxxx |
|
|
Provisions (long-term) |
|
xxxx |
xxxx |
|
|
Deferred tax liabilities |
|
xxxx |
xxxx |
|
|
Total non-current liabilities (a) |
|
xxxxx |
xxxxx |
|
Current Liabilities: |
|
|
|
|
|
|
Loan and borrowings (short term) |
|
xxxx |
xxxx |
|
|
Trade payables (creditor, B/P, A/P) |
|
xxxx |
xxxx |
|
|
Income tax liability |
|
xxxx |
xxxx |
|
|
Employees benefits |
|
xxxx |
xxxx |
|
|
Provisions (short-term) |
|
xxxx |
xxxx |
|
|
Other payables |
|
xxxx |
xxxx |
|
|
Liability of asset held for sale |
|
xxxx |
xxxx |
|
|
Total current liabilities (b) |
|
xxxxx |
xxxxx |
|
|
Total Liabilities (a+b) |
|
xxxxx |
xxxxx |
|
|
TOTAL EQUITY AND LIABILITIES |
|
xxxxx |
xxxxx |
Explanation of Balance Sheet Transactions
The assets side of the balance sheet contents different types of assets; they are explained below:
ASSETS
Non-current assets
Non-current assets are also known as fixed assets or tangible assets.
These assets have life more than one year and higher value.
These assets are depreciated according to their working life or value.
Non-current assets include:
|
Property, plant and equipment |
Intellectual assets (patents, copyrights, trademark) |
|
Land and building |
Biological assets (plants, trees, animals, birds) |
|
Plant and machinery |
Investment property |
|
Vehicles |
Investment in associates* |
|
Furniture and fitting |
Other investment |
|
Equipment |
Long-term receivable (notes receivable) |
|
Intangible assets (goodwill) |
Deferred tax assets |
|
|
|
Keep in Mind
|
Depreciation is deducted from related tangible asset. |
|
Accumulated depreciation is shown in bracket or minus symbol below the tangible asset; or can be shown in liabilities side of balance sheet. |
|
Amortization or written off is deducted from related intangible asset. |
|
*When a company acquires 20% to 50% equity shares of other company, it is known as investment in associates |
Current assets
Current asset means asset can be converted into cash within one year.
Cash is receivable within one year.
Expense limit expires within one year.
Current assets include:
|
Cash and cash equivalent |
Account receivable, bills receivable |
|
Bank balance |
Notes receivable |
|
Advance expenses |
Debtors and customers |
|
Prepaid expenses |
Inventories, Closing stock, Merchandise |
|
Short-term investment |
Other current assets |
|
|
|
Click on the photo for FREE eBooks
#####
|
Click on link for YouTube videos |
|
|
Accounting Equation |
|
|
Journal Entries in Nepali |
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Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cashbook |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Click on link for YouTube videos chapter wise |
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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#####
Equity or shareholders’ equity
Shareholders’ equity or stockholders’ equity is one of the major sections of a corporation’s balance sheet.
It is the difference between the reported amounts of an organization’s assets and liabilities.
Stockholders’ equity includes:
|
Common stocks (equity shares, ordinary shares) |
Capital reserve |
|
Preferred stocks (preference shares) |
General reserve |
|
Additional paid-in capital (share premium or security premium) |
Reserve and funds |
|
Retained earnings (surplus, net profit after tax) |
Treasury stock, if any |
Non-current liabilities (long-term liabilities)
Non-current liabilities are the long-term debt.
These liabilities are paid in more than one year.
Sometime, this time may be thirty years.
Non-current liabilities include:
|
Debentures |
Deferred tax liabilities |
|
Bonds |
Long-term lease and obligations |
|
Bonds payable |
Pension benefits obligations |
|
Long-term loans |
Other non-current assets |
|
Long-term debt |
|
Note: if the portion of a bond payable matures within an accounting period, that portion becomes current liability.
Current liabilities
Current liabilities mean a liability should be paid or settled within one year.
Current liabilities include:
|
Account payable, bills payable |
Advance incomes, advance received |
|
Creditors, suppliers, vendors |
Advance on sales |
|
Notes payable |
Income tax payable |
|
Bank overdraft |
Dividend payable |
|
Short-term loan |
Interest payable |
|
Outstanding expenses |
Calls in advance |
|
Expenses payable, expenses due |
Unclaimed dividend |
|
|
Other current liabilities |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
LQ Company Ltd has following extracted information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Plant and machinery |
4,56,000 |
Accumulated depreciation-plant |
260,000 |
|
Land |
8,44,000 |
Inventories |
2,78,160 |
|
Investment in government securities |
36,745 |
Account receivable |
87,500 |
|
Notes receivable-long-term |
1,34,700 |
Cash and cash equivalent |
13,650 |
|
Common stocks of $10 par value |
3,75,000 |
Asset held for sale this year |
1,64,200 |
|
Additional paid in capital |
75,000 |
Notes payable (long-term) |
3,52,500 |
|
Preferred stocks |
2,50,000 |
Pension fund |
2,74,230 |
|
Retained earnings |
1,12,725 |
Bank loan |
45,500 |
|
Bank overdraft |
70,450 |
Dividend payable |
37,500 |
|
Account payable |
1,25,000 |
Other payables |
11,530 |
|
Income tax payable |
25,520 |
|
|
Required: Statement of Financial Position as per NFRS
[Answer: TA = $17,54,955; Equity = $8,12,725; Liabilities = $9,42,230]
SOLUTION
Statement of Financial Position as per NFRS
LQ Company Ltd
As on 31st March 2023
|
Particulars |
Notes |
Amount |
|
|
ASSETS |
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
Plant and machinery |
1 |
1,96,000 |
|
|
Land |
|
8,44,000 |
|
|
Investment in government securities |
|
36,745 |
|
|
Notes receivable-long-term |
|
1,34,700 |
|
|
Total non-current assets (A) |
|
12,11,445 |
|
Current Assets: |
|
|
|
|
|
Inventories |
|
2,78,160 |
|
|
Account receivable |
|
87,500 |
|
|
Cash and cash equivalent |
|
13,650 |
|
|
Asset held for sale* |
|
1,64,200 |
|
|
Total current assets (B) |
|
5,43,510 |
|
|
TOTAL ASSETS (A+B) |
|
17,54,955 |
|
EQUITY |
|
|
|
|
|
Common stocks |
|
3,75,000 |
|
|
Additional paid in capital |
|
75,000 |
|
|
Preferred stocks |
|
2,50,000 |
|
|
Retained earnings |
|
1,12,725 |
|
|
Total Equity |
|
8,12,725 |
|
LIABILITIES |
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
Notes payable (long-term) |
|
3,52,500 |
|
|
Pension fund |
|
2,74,230 |
|
|
Bank loan |
|
45,500 |
|
|
Total non-current liabilities (a) |
|
6,72,230 |
|
Current Liabilities: |
|
|
|
|
|
Bank overdraft |
|
70,450 |
|
|
Account payable |
|
1,25,000 |
|
|
Income tax payable |
|
25,520 |
|
|
Dividend payable |
|
37,500 |
|
|
Other payables |
|
11,530 |
|
|
Total current liabilities (b) |
|
2,70,000 |
|
|
Total Liabilities (a+b) |
|
9,42,230 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
17,54,955 |
Given and working note:
|
1. Net plant and machinery |
4,56,000 |
|
|
|
|
Less: Accumulated depreciation |
(260,000) |
|
|
|
|
|
196,000 |
|
|
|
###########
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Click on link for YouTube videos: |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
|
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Ledger |
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Subsidiary Book |
|
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Cash Book |
|
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Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
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Capital and Revenue |
|
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Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
###########
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
EP Agro Farm Ltd has following extracted information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Property, plant and equipment |
18,00,000 |
Accumulated depreciation-PPE |
2,74,700 |
|
Land |
20,00,000 |
Accumulated depreciation-vehicle |
57,000 |
|
Vehicles |
2,80,000 |
Amortization of Franchise and TM |
24,750 |
|
Franchise and TM |
99,000 |
Inventories of animal feed |
4,32,775 |
|
Biological assets (long-term) |
3,79,640 |
Account receivable |
1,50,930 |
|
Accrued incomes |
7,68,455 |
Prepaid insurance expenses |
25,780 |
|
Office supplies in hand |
4,755 |
Common stocks |
10,50,000 |
|
General reserve |
87,960 |
Additional paid in capital |
1,05,000 |
|
Capital reserve |
3,26,475 |
Preferred stocks |
3,50,000 |
|
Retained earnings |
2,88,540 |
Bank overdraft |
56,478 |
|
Long-term secured debt |
12,34,285 |
Account payable |
1,75,453 |
|
Pension fund |
3,47,325 |
Income tax payable |
23,179 |
|
Bank loan |
17,56,450 |
Advance income received |
33,740 |
Additional information:
a. Land is appreciated by $250,000
Required: Statement of financial position (balance sheet) as per NFRS
[Answer: TA = $58,34,885; Equity = $20,07,975; Liabilities = $36,26,910]
SOLUTION
Statement of Financial Position as per NFRS
EP Agro Farm Ltd
As on 31st March 2023
|
Particulars |
Notes |
Year 2021 |
|
|
ASSETS |
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
Property, plant and equipment |
|
15,25,300 |
|
|
Land |
1 |
22,50,000 |
|
|
Franchise and trademark |
|
75,250 |
|
|
Vehicles |
|
2,23,000 |
|
|
Biological assets (long-term) |
|
3,79,640 |
|
|
Total non-current assets (A) |
|
44,52,190 |
|
Current Assets: |
|
|
|
|
|
Inventories of animal feed |
|
4,32,775 |
|
|
Account receivable |
|
1,50,930 |
|
|
Prepaid insurance expenses |
|
25,780 |
|
|
Accrued incomes |
|
7,68,455 |
|
|
Office supplies in hand |
|
4,755 |
|
|
Total current assets (B) |
|
13,82,695 |
|
|
TOTAL ASSETS (A+B) |
|
58,34,885 |
|
EQUITY |
|
|
|
|
|
Common stocks |
|
10,50,000 |
|
|
Additional paid in capital |
|
1,05,000 |
|
|
Preferred stocks |
|
3,50,000 |
|
|
General reserve |
|
87,960 |
|
|
Capital reserve |
|
3,26,475 |
|
|
Retained earnings |
|
2,88,540 |
|
|
Total Equity |
|
22,07,975 |
|
LIABILITIES |
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
Long-term secured debt |
|
12,34,285 |
|
|
Pension fund |
|
3,47,325 |
|
|
Bank loan |
|
17,56,450 |
|
|
Total non-current liabilities (a) |
|
33,38,060 |
|
Current Liabilities: |
|
|
|
|
|
Bank overdraft |
|
56,478 |
|
|
Account payable |
|
1,75,453 |
|
|
Income tax payable |
|
23,179 |
|
|
Advance income received |
|
33,740 |
|
|
Total current liabilities (b) |
|
2,88,850 |
|
|
Total Liabilities (a+b) |
|
36,26,910 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
58,34,885 |
Given and working note:
|
1. Land |
20,00,000 |
|
|
|
|
Add: Appreciation |
2,50,000 |
|
|
|
|
|
20,00,000 |
|
|
|
Click on book cover for Free eBooks
#####
|
Click on link for YouTube videos |
|
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Accounting for Share |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
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Final Accounts in Nepali |
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Work Sheet |
|
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Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2C
BR Company Ltd has authority capital $10,00,000 dividing into 10,000 equity shares of $100 each. The company issued 8,000 equity shares and called up $90 per share. Public applied for 6,000 shares and paid $80 per shares.
|
Debit balance |
Amount Dr |
Credit balance |
Amount Cr |
|
Account receivable |
6,000 |
6,000 Common stock @ $80 |
4,80,000 |
|
Advance given to KL Traders |
40,000 |
8% Redeemable bond |
6,00,000 |
|
Advance tax paid |
3,000 |
Outstanding bond interest |
24,000 |
|
Calls in arrears |
10,000 |
General reserve |
10,365 |
|
Cash at bank |
9,000 |
Bond redemption fund |
54,635 |
|
Cash in hand |
3,126 |
Sinking fund |
5,000 |
|
Closing stock |
120,300 |
Additional paid in capital |
30,000 |
|
Discount on issue of debenture |
5,000 |
Calls in advance |
2,000 |
|
Discount on issue of shares |
3,000 |
Capital funds |
35,480 |
|
Furniture and equipment |
80,000 |
Long-term deposit from employees |
43,000 |
|
Goodwill |
58,530 |
Account payable |
13,875 |
|
Investment in debenture |
1,00,000 |
Sundry creditors |
10,125 |
|
Investment in government bond |
49,300 |
Expenses payable |
50,230 |
|
Investment in shares |
20,700 |
Advance income received |
17,770 |
|
Patent and trade mark |
49,470 |
Unclaimed dividend |
2,200 |
|
Plant and machinery |
3,00,000 |
Assets replacement fund |
15,320 |
|
Preliminary expenses |
12,390 |
Provision for taxation (current year) |
7,000 |
|
Prepayment insurance |
8,000 |
Dividend payable |
60,000 |
|
Retained loss (Deficit) |
38,000 |
Employees’ provident fund |
15,000 |
|
Spare parts (loose tools) |
1,500 |
|
|
|
Store consume in hand |
5,000 |
|
|
|
Sundry debtors |
96,574 |
|
|
|
Underwriting commission |
7,110 |
|
|
|
Vehicles |
4,50,000 |
|
|
Required: Balance sheet
[Answer: Balance sheet = $14,66,000]
SOLUTION:
Given and working note:
|
1. Authorized capital: |
|
|
|
|
10,000 Equity shares @ $100 |
|
10,00,000 |
|
|
|
|
|
|
|
Issued capital: |
|
|
|
|
8,000 equity shares @ $100 |
|
8,00,000 |
|
|
|
|
|
|
|
Called-up capital: |
|
|
|
|
8,000 equity shares @ $90 |
|
7,20,000 |
|
|
|
|
|
|
|
Applied and paid up capital: |
|
|
|
|
6,000 Common stock @ $80 |
480,000 |
|
|
|
Less: calls in arrear |
(10,000) |
4,70,000 |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Statement of Financial Position
BR Company Ltd
As on 31st March 2023
|
Particulars |
Notes |
Amount |
|
|
ASSETS |
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
Plant and machinery |
|
3,00,000 |
|
|
Vehicles |
|
4,50,000 |
|
|
Furniture and equipment |
|
80,000 |
|
|
Discount on issue of debenture |
|
5,000 |
|
|
Discount on issue of shares |
|
3,000 |
|
|
Goodwill |
|
58,530 |
|
|
P&L Appropriation A/c (Deficit) |
|
38,000 |
|
|
Patent and trade mark |
|
49,470 |
|
|
Preliminary expenses |
|
12,390 |
|
|
Underwriting commission |
|
7,110 |
|
|
Investment in shares |
|
20,700 |
|
|
Investment in debenture |
|
1,00,000 |
|
|
Investment in government bond |
|
49,300 |
|
|
Total non-current assets (A) |
|
11,73,500 |
|
Current Assets: |
|
|
|
|
|
Account receivable |
|
6,000 |
|
|
Advance given to KL Traders |
|
40,000 |
|
|
Advance tax paid |
|
3,000 |
|
|
Cash at bank |
|
9,000 |
|
|
Cash in hand |
|
3,126 |
|
|
Closing stock |
|
1,20,300 |
|
|
Prepayment insurance |
|
8,000 |
|
|
Spare parts (loose tools) |
|
1,500 |
|
|
Store consume in hand |
|
5,000 |
|
|
Sundry debtors |
|
96,574 |
|
|
Total current assets (B) |
|
2,92,500 |
|
|
TOTAL ASSETS (A+B) |
|
14,66,000 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Common stock @$80 |
1 |
4,70,000 |
|
|
General reserve |
|
10,365 |
|
|
Bond redemption fund |
|
54,635 |
|
|
Sinking fund |
|
5,000 |
|
|
Additional paid in capital |
|
30,000 |
|
|
Capital funds |
|
35,480 |
|
|
Assets replacement fund |
|
15,320 |
|
|
Total Equity |
|
6,20,800 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
8% Debenture |
|
6,00,000 |
|
|
Long-term deposit from employees |
|
43,000 |
|
|
Employees’ provident fund |
|
15,000 |
|
|
Total non-current liabilities (a) |
|
6,58,000 |
|
Current Liabilities: |
|
|
|
|
|
Calls in advance |
|
2,000 |
|
|
Account payable |
|
13,875 |
|
|
Sundry creditors |
|
10,125 |
|
|
Interest payable on debentures |
|
24,000 |
|
|
Expenses payable |
|
50,230 |
|
|
Advance income received |
|
17,770 |
|
|
Unclaimed dividend |
|
2,200 |
|
|
Tax payable (current year) |
|
7,000 |
|
|
Dividend payable |
|
60,000 |
|
|
Total current liabilities (b) |
|
187,200 |
|
|
Total Liabilities (a+b) |
|
8,45,200 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
14,66,000 |
#####
|
PROBLEMS AND ANSWERS OF BALANCE SHEET UNDER NFRS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
LR Company Ltd has following extracted information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Land and building |
3,00,000 |
Sundry debtors |
75,000 |
|
Plant and machinery |
2,70,000 |
Accrued income |
5,000 |
|
Patent and trade mark |
96,000 |
Closing stock |
5,69,783 |
|
Equity shares |
2,17,500 |
Cash at bank |
25,789 |
|
Share premium |
63,500 |
Cash in hand |
6,206 |
|
Preference shares |
75,000 |
Long-term debt |
3,65,500 |
|
Retained earnings |
3,18,453 |
Pension fund |
1,42,780 |
|
Bank overdraft |
45,320 |
Bank loan |
89,785 |
|
Bills payable |
1,47,560 |
Dividend payable |
63,500 |
|
Income tax payable |
25,895 |
Other payables |
14,985 |
Additional information:
a. Land is appreciated by $100,000
b. Accumulated depreciation on plant and machinery is $54,000
c. Patents and trademark are written off by $24,000
Required: Statement of financial position (balance sheet) as per NFRS
[Answer: TA = $13,69,778; Equity = $6,74,453; Liabilities = $6,95,325]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
BCN Company Ltd has authority capital $15,00,000 dividing into 9,000 equity shares and 6,000; 6% preference shares of $100 each. The company issued 5,000 equity shares and 3,000 preference shares.
Trial Balance
For the year ended 31st December 2022
|
Debit balance |
Amount Dr |
Credit balance |
Amount Cr |
|
Land and building |
4,12,300 |
5,000 Equity shares @ $100 |
5,00,000 |
|
Plant and machinery |
2,12,000 |
3,000; 6% Preference shares @ $100 |
3,00,000 |
|
Vehicle |
80,000 |
Calls in advance |
3,000 |
|
Furniture and fixture |
37,700 |
General reserve |
25,350 |
|
Patent and trade mark |
20,000 |
Sinking fund |
11,650 |
|
Fixed deposit into bank |
70,000 |
Surplus |
55,745 |
|
Goodwill |
30,460 |
Share premium on equity shares |
4,255 |
|
Investment in shares |
50,000 |
Capital funds |
39,700 |
|
Investment in government bond |
60,000 |
Debenture (bonds) |
50,000 |
|
Sundry debtors |
75,385 |
Unsecured loan |
35,000 |
|
Accrued income |
4,615 |
Bills payable |
65,450 |
|
Spare parts (loose tools) |
1,500 |
Sundry creditors |
29,550 |
|
Closing stock |
69,495 |
Outstanding expenses |
16,225 |
|
Cash at bank |
24,505 |
Advance received incomes |
1,775 |
|
Cash in hand |
5,315 |
Unclaimed dividend |
7,360 |
|
Bills receivable |
45,685 |
Bank overdraft |
12,640 |
|
Prepaid expenses |
8,145 |
Provision for taxation |
11,300 |
|
Advance tax paid |
2,855 |
Proposed dividend on equity shares |
50,000 |
|
Preliminary expenses |
11,540 |
Pension fund of employees |
18,000 |
|
Underwriting commission |
7,500 |
|
|
|
Discount on issue of preference shares |
3,000 |
|
|
|
Calls in arrears |
5,000 |
|
|
Required: Balance sheet
[Answer: Balance sheet = $12,32,000]
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3. Income Statement under NFRS | Profit or Loss Statement under NFRS | SOLUTION
Final Accounts Prescribed by Company Act and Accounting Standard
All the limited company or LLC business organizations need to prepare financial statements on prescribed format of the company account and accounting standard.
Nepal Accounting Standard (NAS) has prescribed the formats for financial statements.
Nepal Financial Reporting Standards (NFRS) follows rules and regulation of NAS.
All the business organizations need to consider the prescribed format of the accounting standard for preparation and submission of final accounts.
Final accounts involve the following statements:
· Income Statement (Profit or Loss Statement)
· Balance sheet (Statement of Financial Position)
Income Statement (Profit or Loss Statement) under NFRS
An income statement shows the net result of the business operations during an accounting period.
It may include manufacturing account, trading account, profit and loss account.
Income statement presents the summary of revenues, expenses and net income or net loss of a firm.
It serves as a profitability measure of the firm.
The amount received from operating activities is known as revenue income.
It is the income earned from goods selling or services provide.
It also includes received of discount, commission, interest, transfer fees etc.
Expenditure is incurred for the running productivity or earning capacity of a business.
Such expenditure yields benefits in current accounting period.
It involves all the accounting transactions of trading account, profit and loss account and profit and loss appropriation account.
It considers a vertical format of income statement (profit or loss statement) the specimen of which is shown below:
Profit or Loss Statement under NFRS
ABC Company Ltd
For the year ended 31st March 20XX
|
Particulars |
Notes |
Amount (CY) |
Amount (LY) |
|
|
Sales revenue (net) |
|
×××× |
×××× |
|
|
Less: |
Cost of goods sold |
|
(×××) |
(×××) |
|
|
Gross profit |
|
×××× |
×××× |
|
Add: |
Other income |
|
×××× |
xxxx |
|
Less: |
Operating expenses: |
|
|
|
|
|
Office, general and administrative expenses |
|
×××× |
xxxx |
|
|
Selling and distribution expenses |
|
×××× |
xxxx |
|
|
Depreciation expenses |
|
×××× |
xxxx |
|
|
Amortization |
|
×××× |
xxxx |
|
|
Profit from operation |
|
×××× |
×××× |
|
Less: |
Financial expenses: |
|
|
|
|
|
Interest expenses |
|
(×××) |
(×××) |
|
|
Profit before tax |
|
×××× |
×××× |
|
Less: |
Income tax |
|
(×××) |
(×××) |
|
|
Profit from continuing operations |
|
×××× |
×××× |
|
|
Profit or loss from discontinued operation (net after tax) |
|
± ××× |
± ××× |
|
|
Net profit after tax |
|
×××× |
×××× |
|
|
Basic earnings per share |
|
|
|
|
|
Diluted Earnings per share |
|
|
|
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#####
|
Click on link for YouTube videos: |
|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
#####
Explanation of Income Statement Transactions
Sales revenue, turnover or service revenue
Sales revenue is the major incomes of the goods selling company.
The sales amount must include only sale of goods not sales of fixed assets.
Sales include both the cash and credit sales made during an accounting period.
Sales returns or return inward is deducted from sales.
Service revenue is the major incomes of the service providing company.
Both sales and service revenues include cash and credit sales and service.
Some electronics manufacturing companies sell the goods and provide the services.
Other incomes and gains
Company earns some incomes other than sales revenue or service revenue.
Company can sell tangible assets and investment at profit; this profit is also other income.
Some incomes and gains are given below:
|
Rent received |
Appreciation on assets |
|
Commission received |
Apprentice/trainee premium |
|
Interest received |
Profit on assets |
|
Discount received |
Unearned commission earned |
|
Dividend received |
Profit on sales of asset |
|
Compensation received |
Profit on sales of investment |
|
Bad debts recovered |
|
Cost of goods sold
Cost of goods sold includes the direct costs of producing the goods sold by a company.
This amount includes direct materials and direct labour directly used to produce the good.
It excludes indirect expenses, distribution expenses and sales commission.
Cost of goods sold = Beginning inventory + Net purchase – Ending inventory
Or
Cost of goods sold (COGS):
|
Opening stock |
×××× |
|
|
Purchase |
×××× |
|
|
Less: Purchase return |
(×××) |
|
|
Add: Carriage or freight on purchase |
×××× |
|
|
Add: Wages for loading and unloading |
×××× |
|
|
Less: Closing stock |
(×××) |
|
|
Cost of goods sold* |
×××× |
|
Operating expenses
Operating expenses mean daily, weekly, fortnightly, monthly, quarterly, half-yearly and annually expenses.
These expenses are recurring in nature.
These expenses are related to general office, administrative and selling expenses.
Non-cash expenses like depreciation and amortization are also included in operating expenses.
Some operating incomes are given below:
|
General and administrative expenses: |
Selling and distribution expenses: |
|
Salary and wages |
Carriage or freight outward |
|
Director’s fees |
Carriage or freight on sales |
|
Office rent, rates and tax |
Travelling expenses |
|
Printing and stationery of office |
Advertisement and publicity |
|
Postage and courier expenses |
Free sample |
|
Insurance |
Sales expenses |
|
Phone, mobile, internet expenses |
Packing expenses |
|
Bank charge |
Salary to sales girl/man/woman/agent |
|
Legal charge |
Commission to sales agent |
|
License fees |
Rent of warehouse or godown |
|
Audit fee |
Stationery, postage expenses of warehouse |
|
Staff benefits |
Phone, mobile, internet expenses |
|
Bonus to staff |
Insurance of warehouse |
|
Office lighting and power |
Trade or trading expenses |
|
Entertainment expenses |
Delivery expenses |
|
General expenses |
Bad debts |
|
Establishment expenses |
Discount allowed |
|
Commission paid |
Depreciation on warehouse assets etc. |
|
Manager’s commission |
|
|
Depreciation on office assets |
|
|
Written-off or amortization etc. |
|
Financial expenses
Financial expenses are related to loan obligation or borrowings.
Generally, the company takes loan from outsiders.
These outsiders are investors or creditors.
The company takes loan in the forms of debentures, bonds, bank loan, long-term debt, short-term loan etc.
The company has to pay interest on these loans according to their nature and terms.
Some financial expenses are given below:
|
Interest on loan |
Loss on sales of investment |
|
Interest on debentures or bonds |
Amortization of bonds redemption premium |
|
Loss on foreign exchange |
Commission and fees related to loan |
|
Expenses on disposal of marketable security |
Expenses related to letter of credit |
Income tax expenses
Every business firm has to pay tax to the state and central government.
Some taxes are given below:
|
Sales tax |
Value added tax (VAT) |
|
Income tax |
Goods and service tax (GST) |
Profit or loss from discontinued operation segment
Sometimes a company can stop the business of the one of its segment.
There may be different reasons for discontinued the business but major reason is bearing losses.
The company sells entire assets and settles liabilities of that discontinued segment.
While selling, there may be profit or loss.
Profit or loss from discontinued operations is distinguished from income from continuing operations.
The company has to adjust taxes on discontinued segment of the business.
It is shown after tax on income statement (profit or loss statement)
Example
ABC Company has following extracted data:
Net profit before tax from continuing operations $325,650
Net profit before tax from discontinuing operations $28,000
Book value of the discontinued segment of the business $125,000
Disposal value of the discontinued segment $132,350
Tax rate applicable 30%
Required: (1) Net profit or loss from discontinued operation after tax; (2) Net profit after tax
[Answer: NPAT = $252,700]
SOLUTION
Net profit or loss from discontinued operation after tax
Here, 30% tax means 70% profit
|
Net profit after tax from discontinuing operations |
$28,000 × 70% |
19,600 |
|
Profit on discontinuing operations |
($132,350 CSV – $125,000 BSV) × 70% |
5,145 |
|
Net profit from discontinued operation after tax |
$24,745 |
|
Extracted Income Statement
|
|
Particulars |
Notes |
Amount |
Amount |
|
|
Profit before tax |
|
|
325,650 |
|
Less: |
Income tax expenses (325,650 @ 30%) |
|
|
(97,695) |
|
|
Profit from continuing operations |
|
|
227,955 |
|
Add: |
Profit from discontinued operation after net tax |
|
|
24,745 |
|
|
Net profit after tax |
|
|
252,700 |
Basic Earnings Per Share
It measures the profit available to common stockholders on per share basis.
This ratio expresses the earning power of the company based equity shareholder viz how much amount can be paid as dividend.
More value per share is better for company.
Formula of basic earnings per share (Basic EPS)
= [(NPAT – Preference dividend) ÷ No. of outstanding common stocks]
Or
= (Earnings available to common stockholders ÷ No. of outstanding common stocks)
Diluted Earnings Per Share
Here, diluted means reduce the value of stock or share.
Diluted EPS shows the quality of earnings per share.
While calculating earnings per share, we ignore the diluted securities.
This ignorance increases the value of earnings per share.
Diluted securities are not common stocks but they can be converted to common stocks.
Diluted securities are convertible preferred stocks, convertible debentures, stock option and warrants.
By converting these securities into common stocks, they increase number of outstanding common stocks but decrease the value of basic EPS.
Thus, diluted EPS is generally lower than basic EPS.
Keep in Mind
|
Dilutive EPS is considered a conservative metric because it indicates a worst-case scenario in terms of EPS. |
|
In the rare case if there are anti-dilutive securities viz the value of diluted EPS may be higher than EPS. |
Formula of Diluted EPS
= (NPAT – PD ÷ (No. of outstanding common stocks + No. of conversion of dilutive securities)
Example
ABC Company Ltd has following extracted information:
50,000 outstanding common stocks of $10 par value at the market value of $12.
Net income after tax of the current year $200,000
30,000 convertible debentures; they can be converted into common stocks of $10 each.
Required: (a) Basic earnings per share; (b) Number of new common stocks; (c) Diluted earnings per share
[Answer: (a) $4; (b) $300,000; (c) $2.67]
SOLUTION:
(a) Basic earnings per share
= NIAT ÷ No. of common stocks
= $200,000 ÷ 50,000
= $4
(b) Number of new common stocks
Value of convertible debentures
= 30,000 x $10 face value
= $300,000
No. of new common stocks
= $300,000 ÷ $12 market value
= 25,000
(c) Diluted earnings per share
= (NPAT – PD) ÷ (No. of outstanding common stocks + No. of conversion of dilutive securities)
= ($200,000 – Nil) ÷ (50,000 + 25,000)
= $200,000 ÷ 75,000
= $2.67
#####
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|
Accounting for Share |
http://tiny.cc/889jkz |
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
|
|
Final Accounts in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
|
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LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
ABC Traders has following extracted information:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Opening stock |
75,800 |
Purchase |
500,000 |
|
Closing stock |
142,600 |
Purchase expenses |
22,080 |
Required: Cost of goods sold
[Answer: $455,280]
SOLUTION
Cost of goods sold
|
|
Amount $ |
Amount $ |
|
Opening stock |
|
75,800 |
|
Add: Purchase |
500,000 |
|
|
Add: Purchase expenses |
22,080 |
522,080 |
|
Less: Closing stock |
|
(142,600) |
|
COGS |
|
455,280 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
KL Enterprises has following extracted information:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Beginning inventories |
36,500 |
Carriage inward |
18,750 |
|
Ending inventories |
56,780 |
Purchase return |
6,340 |
|
Purchase of goods |
157,870 |
|
|
Required: Cost of goods sold
[Answer: $150,000]
SOLUTION
Cost of goods sold
|
|
Amount $ |
Amount $ |
|
Beginning inventories |
|
36,500 |
|
Add: Purchase |
157,870 |
|
|
Add: Carriage inward |
18,750 |
|
|
Less: Purchase return |
(6,340) |
170,280 |
|
Less: Ending inventories |
|
(56,780) |
|
COGS |
|
150,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
JE Enterprises has following information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Sales revenue |
254,300 |
Interest income |
41,700 |
|
Administrative expenses |
49,540 |
Cost of goods sold |
150,000 |
|
Selling and distribution expenses |
17,060 |
Rent expenses |
49,300 |
|
Depreciation expenses |
7,850 |
Interest expenses of debenture |
54,000 |
|
Loss from discontinued operation |
1,170 |
Goodwill written off |
5,500 |
|
Income tax expenses |
30% |
No. of outstanding common stocks |
3,500 |
Required: (a) Income statement as per NFRS; (b) Basic EPS if outstanding stocks are 3,500
[Answer: GP = Rs 104,300; NPBT = Rs 12,000; NPAT = $7,320; Basic EPS = $2.09]
SOLUTION
Profit or Loss Statement under NFRS
JC Enterprises
For the year ended 31st March 2023
|
Particulars |
Notes |
Amount |
Amount |
|
|
Sales revenue (net) |
|
|
254,300 |
|
|
Less: |
Cost of goods sold* |
|
|
(150,000) |
|
|
Gross profit |
|
|
104,300 |
|
Add: |
Other income (interest income) |
|
|
41,700 |
|
Less: |
Operating expenses: |
|
|
|
|
|
Office and administrative expenses |
|
49,540 |
|
|
|
Selling and distribution expenses |
|
17,060 |
|
|
|
Depreciation expenses |
|
7,850 |
|
|
|
Goodwill written off |
|
5,500 |
(80,000) |
|
|
Profit from operation |
|
|
66,000 |
|
Less: |
Financial expenses: |
|
|
|
|
|
Interest on loan/debentures/bonds |
|
|
(54,000) |
|
|
Profit before tax |
|
|
12,000 |
|
Less: |
Income tax expenses ($12,000 @ 30%) |
|
|
(3,600) |
|
|
Profit from continuing operations |
|
|
8,400 |
|
Less: |
Loss from discontinued operation after tax |
|
|
(1,170) |
|
|
Net profit after tax |
|
|
7,320 |
|
|
Basic EPS ($7,320 ÷ 3,500 stocks) |
|
|
$2.09 |
|
|
Diluted earnings per share |
|
|
|
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
MN Company Ltd has following information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Sales return |
14,560 |
Sales revenue |
956,300 |
|
Cost of goods sold |
455,280 |
Dividend received |
14,320 |
|
Salaries to office staffs |
94,174 |
Compensation received |
56,895 |
|
Legal charge |
5,670 |
Profit from discontinued operation (net) |
23,980 |
|
License fees |
1,750 |
Selling expenses |
24,500 |
|
Audit fee |
15,260 |
Warehouse lighting and power |
2,786 |
|
Commission and fees for loan process |
3,564 |
Depreciation expenses |
27,850 |
|
Expenses related to letter of credit |
856 |
Goodwill amortization |
13,000 |
Other information:
The company pays income tax 30%
No. of outstanding common stocks are 48,000
No. of outstanding common stocks with diluted stocks are 50,000
Required: (a) Income statement as per NFRS; (b) Basic EPS; (c) Diluted EPS
[Answer: NPAT = $281,765; Basic EPS = $5.87; Diluted EPS = $5.63]
SOLUTION
Profit or Loss Statement under NFRS
MN Company Ltd
For the year ended 31st March 2023
|
Particulars |
Notes |
Amount |
Amount |
||
|
Net sales revenue |
1 |
|
941,740 |
||
|
Less: |
Cost of goods sold* |
|
|
(455,280) |
|
|
|
Gross profit |
|
|
4,86,460 |
|
|
Add: |
Other incomes |
2 |
|
71,215 |
|
|
Less: |
Operating expenses: |
|
|
|
|
|
|
Office and administrative expenses |
3 |
116,854 |
|
|
|
|
Selling and distribution expenses |
4 |
27,286 |
|
|
|
|
Depreciation expenses |
|
27,850 |
|
|
|
|
Goodwill amortization |
|
13,000 |
(184,990) |
|
|
|
Profit from operation |
|
|
372,685 |
|
|
Less: |
Financial expenses: |
|
|
|
|
|
|
Commission and fees for loan process |
|
3,564 |
|
|
|
|
Expenses related to letter of credit |
|
856 |
(4,420) |
|
|
|
Profit before tax |
|
|
368,265 |
|
|
Less: |
Income tax expenses (368,265 × 30%) |
|
|
(110,480) |
|
|
|
Profit from continuing operations |
|
|
257,785 |
|
|
Add: |
Profit from discontinued operation after tax |
|
|
23,980 |
|
|
|
Net profit after tax |
|
|
281,765 |
|
|
|
Basic EPS |
|
5 |
|
$5.87 |
|
|
Diluted EPS |
|
6 |
|
$5.63 |
Given and working note:
|
(1) Net sales |
|
(5) Basic EPS |
|
Sales revenue |
956,300 |
= NPAT ÷ No. of outstanding stocks |
|
Less: Sales return |
(14,560) |
= $281,765 ÷ 48,000 stocks |
|
|
941,740 |
= $5.87 |
|
|
|
|
|
(2) Other incomes |
|
(6) Diluted EPS |
|
Dividend received |
14,320 |
= NPAT ÷ No. of outstanding diluted stocks |
|
Compensation received |
56,895 |
= $281,765 ÷ 50,000 stocks |
|
|
71,215 |
= $5.63 |
|
|
|
|
|
(3) Office and administrative expenses: |
|
|
|
Salaries to office staffs |
94,174 |
|
|
Legal charge |
5,670 |
|
|
License fees |
1,750 |
|
|
Audit fee |
15,260 |
|
|
|
116,854 |
|
|
|
|
|
|
(4) Selling and distribution expenses: |
|
|
|
Selling expenses |
24,500 |
|
|
Warehouse lighting and power |
2,786 |
|
|
|
27,286 |
|
#####
|
PROBLEMS AND ANSWERS OF INCOME STATEMENT UNDER NFRS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
EP Traders has following extracted information:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Beginning inventories |
1,75,850 |
Carriage inward |
65,450 |
|
Ending inventories |
2,36,840 |
Purchase return |
42,775 |
|
Purchase of goods |
13,00,000 |
Import duty |
48,055 |
Required: Cost of goods sold
[Answer: $13,09,740]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
SLR Company Ltd has following information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Commission received |
2,430 |
Sales revenue |
745,320 |
|
Interest on loan |
14,785 |
Administrative expenses |
45,230 |
|
Distribution expenses |
7,840 |
Selling expenses |
74,320 |
|
Depreciation expenses |
12,475 |
Profit from discontinued operation |
8,373 |
|
Tax rate |
30% |
Cost of goods sold |
356,740 |
|
No. common stocks basic |
5,000 |
No. of common stocks diluted |
5,600 |
Required: (a) Income statement as per NFRS; (b) Basic EPS; (c) Diluted EPS
[Answer: (a) NPAT = $173,825;
(b) Basic ESP = $34.77; (c) Diluted EPS = $31.04]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
MTR Company Ltd has following information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Sales revenue |
26,36,500 |
Sales return |
18,360 |
|
Salaries to office staffs |
251,810 |
Dividend received |
5,785 |
|
Director’s fees |
75,300 |
Cost of goods sold |
13,09,740 |
|
Office rent and rates |
36,000 |
Postage and courier expenses |
2,230 |
|
Printing and stationery expenses |
3,550 |
Insurance expenses |
12,400 |
|
Interest on loan |
125,685 |
Phone, mobile, internet expenses |
18,500 |
|
Loss from discontinued operation (net) |
14,786 |
Bank service charge |
820 |
|
Loss on sales of investment |
2,185 |
Depreciation of fixed assets |
47,630 |
Other information:
No. of outstanding common stocks are 50,000
The company pays income tax 25%
Required: (a) Income statement as per NFRS; (b) Basic EPS
[Answer: (a) NPAT = $461,770; (b) Basic ESP = $9.24]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
Buds Company Ltd has following information on 31st March 2023:
|
Ledger balances |
Amount $ |
Ledger balances |
Amount $ |
|
Sales revenue |
632,745 |
Sales return |
14,680 |
|
Commission to sales agent |
16,970 |
Bad debts recovered |
3,452 |
|
Rent of warehouse |
12,000 |
Appreciation on land |
52,300 |
|
Stationery and postage expenses |
366 |
Cost of goods sold |
354,145 |
|
Insurance of warehouse |
1,850 |
Administrative expenses |
61,825 |
|
Depreciation expenses |
37,455 |
Sundry office expenses |
3,740 |
|
Interest on loan |
9,432 |
Sales expenses |
8,224 |
|
Loss on sales of investment |
4,620 |
Packing expenses |
680 |
|
Loss from discontinued operation (net) |
14,780 |
Salary to sales girl |
6,830 |
Other information:
The company pays income tax 30%
No. of outstanding common stocks are 4,500
No. of outstanding common stocks with diluted stocks are 5,000
Required: (a) Income statement as per NFRS; (b) Basic EPS; (c) Diluted EPS
[Answer: (a) NPAT = $89,980; (b) Basic ESP = $20; Diluted EPS = $18]
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2. Explanation of Income Statement under & Balance Sheet under NFRS
Final Accounts Prescribed by Company Act and Accounting Standard
All the limited company or LLC business organizations need to prepare financial statements on prescribed format of the company account and accounting standard.
Nepal Accounting Standard (NAS) has prescribed the formats for financial statements.
Nepal Financial Reporting Standards (NFRS) follows rules and regulation of NAS.
All the business organizations need to consider the prescribed format of the accounting standard for preparation and submission of final accounts.
Final accounts involve the following statements:
· Income Statement (Profit or Loss Statement)
· Balance sheet (Statement of Financial Position)
Income Statement (Profit or Loss Statement) under NFRS
An income statement shows the net result of the business operations during an accounting period.
It may include manufacturing account, trading account, profit and loss account, profit and loss appropriation account.
Income statement presents the summary of revenues, expenses and net income or net loss of a firm.
It serves as a profitability measure of the firm.
The amount received from operating activities is known as revenue income.
It is the income earned from goods selling or services provide.
It also includes received of discount, commission, interest, transfer fees etc.
Expenditure is incurred for the running productivity or earning capacity of a business.
Such expenditure yields benefits in current accounting period.
It involves all the accounting transactions of trading account, profit and loss account and profit and loss appropriation account.
It considers a vertical format of income statement (profit or loss statement) the specimen of which is shown below:
Profit or Loss Statement under NFRS
For the year ended 31st March 20XX
|
Particulars |
Notes |
Amount CY |
Amount LY |
|
|
Sales revenue (net) |
|
xxxx |
xxxx |
|
|
Less: |
Cost of goods sold* |
|
(xxx) |
(xxx) |
|
|
Gross profit |
|
xxxx |
xxxx |
|
Add: |
Other income |
|
xxxx |
xxxx |
|
Less: |
Operating expenses: |
|
|
|
|
|
Office, general and administrative expenses |
|
xxxx |
xxxx |
|
|
Selling and distribution expenses |
|
xxxx |
xxxx |
|
|
Depreciation expenses |
|
xxxx |
xxxx |
|
|
Written off or amortization |
|
xxxx |
xxxx |
|
|
Profit from operation |
|
xxxx |
xxxx |
|
Less: |
Financial expenses: |
|
|
|
|
|
Interest |
|
(xxx) |
(xxx) |
|
|
Profit before tax |
|
xxxx |
xxxx |
|
Less: |
Income tax |
|
(xxx) |
(xxx) |
|
|
Profit from continuing operations |
|
xxxx |
xxxx |
|
|
Profit or loss from discontinued operation (net after tax) |
|
± xxx |
± xxx |
|
|
Net profit after tax |
|
xxxx |
xxxx |
|
|
Basic earnings per share |
|
|
|
|
|
Diluted Earnings per share |
|
|
|
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|
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|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
#####
Explanation of Income Statement Transactions
Sales revenue, turnover or service revenue
Sales revenue is the major incomes of the goods selling company.
The sales amount must include only sale of goods not sales of fixed assets.
Sales include both the cash and credit sales made during an accounting period.
Sales returns or return inward is deducted from sales.
Service revenue is the major incomes of the service providing company.
Both sales and service revenues include cash and credit sales and service.
Some electronics manufacturing companies sell the goods and provide the services.
Other incomes and gains
Company earns some incomes other than sales revenue or service revenue.
Company can sell tangible assets and investment at profit; this profit is also other income.
Some incomes and gains are given below:
|
Rent received |
Appreciation on assets |
|
Commission received |
Apprentice/trainee premium |
|
Interest received |
Profit on assets |
|
Discount received |
Unearned commission earned |
|
Dividend received |
Profit on sales of asset |
|
Compensation received |
Profit on sales of investment |
|
Bad debts recovered |
|
Cost of goods sold
Cost of goods sold includes the direct costs of producing the goods sold by a company.
This amount includes direct materials and direct labour directly used to produce the good.
It excludes indirect expenses, distribution expenses and sales commission.
Cost of goods sold = Beginning inventory + Net purchase – Ending inventory
Or
Cost of goods sold (COGS):
|
Opening stock |
×××× |
|
|
Purchase |
×××× |
|
|
Less: Purchase return |
(×××) |
|
|
Add: Carriage or freight on purchase |
×××× |
|
|
Add: Wages for loading and unloading |
×××× |
|
|
Less: Closing stock |
(×××) |
|
|
Cost of goods sold* |
×××× |
|
Operating expenses
Operating expenses mean daily, weekly, fortnightly, monthly, quarterly, half-yearly and annually expenses.
These expenses are recurring in nature.
These expenses are related to general office, administrative and selling expenses.
Non-cash expenses like depreciation and amortization are also included in operating expenses.
Some operating incomes are given below:
|
General and administrative expenses: |
Selling and distribution expenses: |
|
Salary and wages |
Carriage or freight outward |
|
Director’s fees |
Carriage or freight on sales |
|
Office rent, rates and tax |
Travelling expenses |
|
Printing and stationery of office |
Advertisement and publicity |
|
Postage and courier expenses |
Free sample |
|
Insurance |
Sales expenses |
|
Phone, mobile, internet expenses |
Packing expenses |
|
Bank charge |
Salary to sales girl/man/woman/agent |
|
Legal charge |
Commission to sales agent |
|
License fees |
Rent of warehouse or godown |
|
Audit fee |
Stationery, postage expenses of warehouse |
|
Staff benefits |
Phone, mobile, internet expenses |
|
Bonus to staff |
Insurance of warehouse |
|
Office lighting and power |
Trade or trading expenses |
|
Entertainment expenses |
Delivery expenses |
|
General expenses |
Bad debts |
|
Establishment expenses |
Discount allowed |
|
Commission paid |
Depreciation on warehouse assets etc. |
|
Manager’s commission |
|
|
Depreciation on office assets |
|
|
Written-off or amortization etc. |
|
Financial expenses
Financial expenses are related to loan obligation or borrowings.
Generally, the company takes loan from outsiders.
These outsiders are investors or creditors.
The company takes loan in the forms of debentures, bonds, bank loan, long-term debt, short-term loan etc.
The company has to pay interest on these loans according to their nature and terms.
Some financial expenses are given below:
|
Interest on loan |
Loss on sales of investment |
|
Interest on debentures or bonds |
Amortization of bonds redemption premium |
|
Loss on foreign exchange |
Commission and fees related to loan |
|
Expenses on disposal of marketable security |
Expenses related to letter of credit |
Income tax expenses
Every business firm has to pay tax to the state and central government.
Some taxes are given below:
|
Sales tax |
Value added tax (VAT) |
|
Income tax |
Goods and service tax (GST) |
Profit or loss from discontinued operation segment
Sometimes a company can stop the business of the one of its segment.
There may be different reasons for discontinued the business but major reason is bearing losses.
The company sells entire assets and settles liabilities of that discontinued segment.
While selling, there may be profit or loss.
Profit or loss from discontinued operations is distinguished from income from continuing operations.
The company has to adjust taxes on discontinued segment of the business.
It is shown after tax on income statement (profit or loss statement)
Example
ABC Company has following extracted data:
Net profit before tax from continuing operations $325,650
Net profit before tax from discontinuing operations $28,000
Book value of the discontinued segment of the business $125,000
Disposal value of the discontinued segment $132,350
Tax rate applicable 30%
Required: (1) Net profit or loss from discontinued operation after tax; (2) Net profit after tax
[Answer: NPAT = $252,700]
SOLUTION
Net profit or loss from discontinued operation after tax
Here, 30% tax means 70% profit
|
Net profit after tax from discontinuing operations |
$28,000 × 70% |
19,600 |
|
Profit on discontinuing operations |
($132,350 CSV – $125,000 BSV) × 70% |
5,145 |
|
Net profit from discontinued operation after tax |
$24,745 |
|
Extracted Income Statement
|
|
Particulars |
Notes |
Amount |
Amount |
|
|
Profit before tax |
|
|
325,650 |
|
Less: |
Income tax expenses (325,650 @ 30%) |
|
|
(97,695) |
|
|
Profit from continuing operations |
|
|
227,955 |
|
Add: |
Profit from discontinued operation after net tax |
|
|
24,745 |
|
|
Net profit after tax |
|
|
252,700 |
Basic Earnings Per Share
It measures the profit available to common stockholders on per share basis.
This ratio expresses the earning power of the company based equity shareholder viz how much amount can be paid as dividend.
More value per share is better for company.
Formula of basic earnings per share (Basic EPS)
= [(NPAT – Preference dividend) ÷ No. of outstanding common stocks]
Or
= (Earnings available to common stockholders ÷ No. of outstanding common stocks)
Diluted Earnings Per Share
Here, diluted means reduce the value of stock or share.
Diluted EPS shows the quality of earnings per share.
While calculating earnings per share, we ignore the diluted securities.
This ignorance increases the value of earnings per share.
Diluted securities are not common stocks but they can be converted to common stocks.
Diluted securities are convertible preferred stocks, convertible debentures, stock option and warrants.
By converting these securities into common stocks, they increase number of outstanding common stocks but decrease the value of basic EPS.
Thus, diluted EPS is generally lower than basic EPS.
Keep in Mind
|
Dilutive EPS is considered a conservative metric because it indicates a worst-case scenario in terms of EPS. |
|
In the rare case if there are anti-dilutive securities viz the value of diluted EPS may be higher than EPS. |
Formula of Diluted EPS
= (NPAT – PD ÷ (No. of outstanding common stocks + No. of conversion of dilutive securities)
Example
ABC Company Ltd has following extracted information:
50,000 outstanding common stocks of $10 par value at the market value of $12.
Net income after tax of the current year $200,000
30,000 convertible debentures; they can be converted into common stocks of $10 each.
Required: (a) Basic earnings per share; (b) Number of new common stocks; (c) Diluted earnings per share
[Answer: (a) $4; (b) $300,000; (c) $2.67]
SOLUTION:
(a) Basic earnings per share
= NIAT ÷ No. of common stocks
= $200,000 ÷ 50,000
= $4
(b) Number of new common stocks
Value of convertible debentures
= 30,000 x $10 face value
= $300,000
No. of new common stocks
= $300,000 ÷ $12 market value
= 25,000
(c) Diluted earnings per share
= (NPAT – PD) ÷ (No. of outstanding common stocks + No. of conversion of dilutive securities)
= ($200,000 – Nil) ÷ (50,000 + 25,000)
= $200,000 ÷ 75,000
= $2.67
Statement of Retained Earnings | Retained Earnings Statement
Retained earnings statement is similar to profit and loss adjustment account.
Statement of retained earnings is prepared after preparation of income statement.
It is prepared for distribution of net profit amount into different purposes.
This statement is prepared to show the decision made by the board of directors regarding distribution of dividend to stockholders, stock dividend issued to stockholders.
Board of directors keeps certain part of net profit amount to different reserve funds.
This statement is also prepared to adjust provisions and expenses of previous accounting year.
These expenses are readjustment of reserve fund amount, proposed dividend etc.
Company Act does NOT specify for the preparation of retained earnings statement
Statement of Retained Earrings
|
Particulars |
Notes |
Year 2023 |
Year 2022 |
|
|
Opening retained earnings |
|
×××× |
×××× |
|
|
Add: |
Net profit after tax |
|
×××× |
×××× |
|
|
Total profit available |
|
×××× |
×××× |
|
Less: |
Interim dividend paid |
|
(×××) |
(×××) |
|
|
Dividend paid or payable on common stocks |
|
(×××) |
(×××) |
|
|
Dividend paid or payable on preferred stocks |
|
(×××) |
(×××) |
|
|
General reserve |
|
(×××) |
(×××) |
|
|
Capital reserve |
|
(×××) |
(×××) |
|
|
Dividend equalization fund |
|
(×××) |
(×××) |
|
|
Sinking fund |
|
(×××) |
(×××) |
|
|
Assets replacement fund |
|
(×××) |
(×××) |
|
|
Bonus shares |
|
(×××) |
(×××) |
|
Closing retaining earnings |
|
×××× |
×××× |
|
Balance Sheet | Statement of Financial Position
Balance sheet is not an account; it is a statement of assets and liabilities of a business organization.
It is a statement summarizing the financial position of an organization.
The balance sheet is prepared at the end or accounting period.
It is prepared after preparation income statement (manufacturing account, trading, profit and loss account).
It is the statement of balances of ledger account, which are not included in income statement.
Therefore, it is called the balance sheet.
The balance sheet contains assets and liabilities.
Liabilities refer to the financial obligation of an organisation.
Assets refer to tangible or intangible rights owned by an organisation.
Here, organisation is a firm, traders, enterprises, company etc.
Statement of Financial Position under NFRS
ABC Company Ltd
For the year ended ………………………..
|
Particulars |
Notes |
Year 2023 |
Year 2022 |
|
|
ASSETS |
|
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
|
Property, plant and equipment |
|
×××× |
×××× |
|
|
Intangible assets |
|
×××× |
×××× |
|
|
Biological assets (long-term) |
|
×××× |
×××× |
|
|
Investment property |
|
×××× |
×××× |
|
|
Investment in associates* |
|
×××× |
×××× |
|
|
Other investment |
|
×××× |
×××× |
|
|
Long-term receivable (notes receivable) |
|
×××× |
×××× |
|
|
Deferred tax assets |
|
×××× |
×××× |
|
|
Total non-current assets (A) |
|
×××× |
×××× |
|
Current Assets: |
|
|
|
|
|
|
Inventories |
|
×××× |
×××× |
|
|
Trade receivable (debtor, B/R, A/R) |
|
×××× |
×××× |
|
|
Cash and cash equivalent |
|
×××× |
×××× |
|
|
Marketable securities |
|
×××× |
×××× |
|
|
Income tax receivable (refund of tax) |
|
×××× |
×××× |
|
|
Other receivables |
|
×××× |
×××× |
|
|
Asset held for sale (sell this year) |
|
×××× |
×××× |
|
|
Total current assets (B) |
|
×××× |
×××× |
|
|
TOTAL ASSETS (A+B) |
|
××××× |
××××× |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
Equity share capital |
|
×××× |
×××× |
|
|
Reserve and funds |
|
×××× |
×××× |
|
|
Retained earnings |
|
×××× |
×××× |
|
|
Preference share capital |
|
×××× |
×××× |
|
|
Non-controlling interest (minority interest) |
|
×××× |
×××× |
|
|
Total Equity |
|
×××× |
×××× |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Non-Current Liabilities: |
|
|
|
|
|
|
Loan and borrowings (long-term) |
|
×××× |
×××× |
|
|
Employees benefits |
|
×××× |
×××× |
|
|
Government grants |
|
×××× |
×××× |
|
|
Derivative financial liabilities |
|
×××× |
×××× |
|
|
Provisions (long-term) |
|
×××× |
×××× |
|
|
Deferred tax liabilities |
|
×××× |
×××× |
|
|
Total non-current liabilities (a) |
|
×××× |
×××× |
|
Current Liabilities: |
|
|
|
|
|
|
Loan and borrowings (short term) |
|
×××× |
×××× |
|
|
Trade payables (creditor, B/P, A/P) |
|
×××× |
×××× |
|
|
Income tax liability |
|
×××× |
×××× |
|
|
Employees benefits |
|
×××× |
×××× |
|
|
Provisions (short-term) |
|
×××× |
×××× |
|
|
Other payables |
|
×××× |
×××× |
|
|
Liability of asset held for sale |
|
×××× |
×××× |
|
|
Total current liabilities (b) |
|
×××× |
×××× |
|
|
Total Liabilities (a+b) |
|
×××× |
×××× |
|
|
TOTAL EQUITY AND LIABILITIES |
|
××××× |
××××× |
Explanation of Balance Sheet Transactions
The assets side of the balance sheet contents different types of assets; they are explained below:
ASSETS
Non-current assets
Non-current assets are also known as fixed assets or tangible assets.
These assets have life more than one year and higher value.
These assets are depreciated according to their working life or value.
Non-current assets include:
|
Property, plant and equipment |
Intellectual assets (patents, copyrights, trademark) |
|
Land and building |
Biological assets (plants, trees, animals) |
|
Plant and machinery |
Investment property |
|
Vehicles |
Investment in associates* |
|
Furniture and fitting |
Other investment |
|
Equipment |
Long-term receivable (notes receivable) |
|
Intangible assets (goodwill) |
Deferred tax assets |
Keep in Mind
|
Depreciation or accumulated depreciation is deducted from related tangible asset. |
|
Amortization or written off is deducted from related intangible asset. |
|
When a company takes 20% to 50% equity shares of other company, it is known as investment in associates* |
Current assets
Current asset means asset can be converted into cash within one year.
Cash is receivable within one year.
Expense limit expires within one year.
Current assets include:
|
Cash and cash equivalent |
Account receivable |
Inventories |
|
Bank balance |
Bills receivable |
Merchandise |
|
Advance expenses |
Notes receivable |
Closing stock |
|
Prepaid expenses |
Debtors and customers |
Other current assets |
|
Short-term investment |
|
|
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#####
|
Click on link for YouTube videos |
|
|
Accounting Equation |
|
|
Journal Entries in Nepali |
|
|
Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cashbook |
|
|
Trial Balance and Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
|
|
|
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Financial Accounting and Analysis (All videos) |
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|
Accounting Process |
|
|
Accounting for Long Lived Assets |
|
|
Analysis of Financial Statement |
|
#####
Equity or shareholders’ equity
Shareholders’ equity or stockholders’ equity is one of the major sections of a corporation’s balance sheet.
It is the difference between the reported amounts of an organization’s assets and liabilities.
Stockholders’ equity includes:
|
Common stocks |
Capital reserve |
|
Preferred stocks |
General reserve |
|
Additional paid-in capital (share premium or security premium) |
Treasury stock, if any |
|
Retained earnings |
|
Non-current liabilities (long-term liabilities)
Non-current liabilities are the long-term debt.
These liabilities are paid in more than one year.
Sometime, this time may be thirty years.
Non-current liabilities include:
|
Debentures |
Deferred tax liabilities |
|
Bonds |
Long-term lease and obligations |
|
Bonds payable |
Pension benefits obligations |
|
Long-term loans |
Other non-current assets |
|
Long-term debt |
|
Note: if the portion of a bond payable matures within an accounting period, that portion becomes current liability.
Current liabilities
Current liabilities mean a liability should be paid or settled within one year.
Current liabilities include:
|
Account payable, bills payable |
Advance incomes, advance received |
|
Creditors, suppliers, vendors |
Advance on sales |
|
Notes payable |
Income tax payable |
|
Bank overdraft |
Dividend payable |
|
Short-term loan |
Interest payable |
|
Outstanding expenses |
Calls in advance |
|
Expenses payable, expenses due |
Unclaimed dividend |
|
|
Other current liabilities |
Arjun EP
EP Online Study
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Classification of Accounting Standards
(1) Nepal Accounting Standards (NAS)
Accounting Standards Board Nepal has developed Nepal Accounting Standards (NAS) under the Nepal Chartered Accountants Act 1997 (ICAN).
Accounting Standards Board Nepal (ASB Nepal) has developed NAS on the basis of International Financial Reporting Standards (IFRS).
The Government of Nepal established Accounting Standards Board (ASB) in March 2003.
Since 2007, ASB has also entrusted by Nepal Government with the responsibility to develop accounting standards for public sector in line with the International Public Sector Accounting Standards (IPASs).
ASB has developed a number of NAS which were based on equivalent IFRS.
It is responsible to set accounting standards for preparation and presentation of financial statements in Nepal.
It is an independent statutory body.
It is sets of accounting and financial reporting standards for business enterprises in Nepal.
NAS does so in line with the Interactional Financial Reporting Standards (IFRS) and International Accounting Standard Board (IASB).
Recently, ASB Nepal has prepared the Exposure Draft of Nepal Public Sector Accounting Standards (NPSAS) for public sector in line with IPSAS 2017 cash basis as per the request of Financial Comptroller of General Office (FCGO).
Objectives of NAS
(a) To formulate accounting standards in line with IFRS issued by IASB.
(b) Full discretion in developing and pursuing the technical agenda for setting Accounting Standards in Nepal
Keep in mind
|
The list of NAS contains: |
|
NAS 1: Presentation of Financial Statements |
|
NAS 2: Inventories |
|
NAS 7: Statement of Cash Flows |
|
NAS 8: Accounting Policies, Changes in Accounting Estimates and Error |
|
NAS10: Events after the Reporting Period |
|
NAS 11: Construction Contracts |
|
NAS 12: Income Taxes |
|
NAS 16: Property, Plant & Equipment |
|
NAS 17: Leases |
|
NAS 18: Revenue |
|
NAS 19: Employee Benefits |
|
NAS 20: Accounting for Government Grants and Disclosure of Government Assistance |
|
NAS 21: The Effects of Changes in Foreign Exchange Rates |
|
NAS 23: Borrowing Cost |
|
NAS 24: Related Party Disclosures |
|
NAS 26: Accounting & Reporting by Retirement Benefit Plans |
|
NAS 27: Consolidated & Separate Financial Statements |
|
NAS 28: Investments in Associates |
|
NAS 32: Financial Instruments: Presentation |
|
NAS 33: Earnings Per Share |
|
NAS 34: Interim Financial Reporting |
|
NAS 36: Impairment of Assets |
|
NAS 37: Provisions, Contingent Liabilities & Contingent Assets |
|
NAS 38: Intangible Assets |
|
NAS 39: Financial Instruments: Recognition & Measurements |
|
NAS 40: Investment Property |
|
NAS 41: Agriculture |
Click on book cover for Free eBooks
#####
|
Click on link for YouTube videos: |
|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
#####
(2) International Accounting Standards (IAS)
IAS was the first international accounting standards.
The International Accounting Standards Committee (IASC) issued them in 1973.
It is an independent international standard-setting body based in London.
The goal of IAS is to make easier to compare businesses around the world, increase transparency and trust in financial reporting, and foster (raise) global trade and investment.
This remains today also.
IAS enables investors and other market participants to make economic decisions about their investment opportunities.
IAS reduces reporting and regulatory costs, especially for companies with international operations and subsidiaries in multiple countries.
The International Financial Reporting Standards (IFRS) replaced IAS in 2001.
At present more than 166 nations adopted IFRS for their domestic companies which are listed on stock exchange; the United States, Japan, and China are the only major capital markets without an IFRS mandate.
The U.S. accounting standards body has been collaborating with the Financial Accounting Standards Board (FASB) since 2002 to improve and coverage American GAAP and IFRS.
Keep in mind
|
The list of IAS contains: |
|
IAS 1: Presentation of Financial Statements |
|
IAS 2: Valuation of Inventories |
|
IAS 7: Cash Flow Statement |
|
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors |
|
IAS 10: Events after Reporting Period |
|
IAS 11: Construction Contracts |
|
IAS 12: Income Taxes |
|
IAS 14: Reporting Financial Information by Segments |
|
IAS 15: Information reflecting the effects of Changing Prices |
|
IAS 16: Property, Plant and Equipment |
|
IAS 17: Leases |
|
IAS 18: Revenue |
|
IAS 19: Employees Benefits |
|
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance |
|
IAS 21: The Effects of Changes in Foreign Exchange Rates |
|
IAS 22: Business Combinations |
|
IAS 23: Borrowing Costs |
|
IAS 24: Related Party Disclosure |
|
IAS 26: Accounting and Reporting by Retirement Benefits Plans |
|
IAS 27: Separate Financial Statements |
|
IAS 28: Investments in Associates and Joint Ventures |
|
IAS 29: Financial Reporting in Hyperinflationary Economics |
|
IAS 30: Disclosure of Financial Statement and Banks and Similar Financial Institutions |
|
IAS 31: Financial Reporting of Interests in Joint Ventures |
|
IAS 32: Financial Instruments: Presentations |
|
IAS 33: Earning per Share |
|
IAS 34: Interim Financials Reporting |
|
IAS 35: Discontinuing Operations |
|
IAS 36: Impairment of Assets |
|
IAS 37: Provisions, Contingent Liabilities and Contingent Assets |
|
IAS 38: Intangible Assets |
|
IAS 39: Financial Instruments: Recognition and Measurement |
|
IAS 40: Investment Property |
|
IAS 41: Agriculture. |
#####
|
Click on link for YouTube videos |
|
|
Accounting for Share |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
|
|
Final Accounts in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
|
Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
(3) Nepal Financial Reporting Standards (NFRS)
NFRS is a common set of accounting standards and reporting language.
Nepal Accounting Standard Board issued NFRS in 2013.
NFRS is prepared in the line of IFRS.
It aims to bring a common base for presentation, measurement, treatments and disclosure of financial events.
NABS published NFRS subjecting the diversity of business scenario and accounting complexity.
There are 40 standards issued by Accounting Standard Board and implemented by Institute of Chartered Accountant of Nepal (ICAN).
ICAN has made it mandatory (compulsory) for listed multinational companies.
ICAN has also made it mandatory for all financial institutions and Nepali listed companies who have minimum paid up capital of Rs 5 crore from fiscal year 2016/17.
Keep in mind
|
The list of NFRS contains: |
|
NFRS 1: First Time Adoption of Nepal Financial Reporting Standards |
|
NFRS 2: Share-based payment |
|
NFRS 3: Business Combination |
|
NFRS 4: Insurance Contracts |
|
NFRS 5: Non-Current Assets Held for Sale & Discontinued Operation |
|
NFRS 6: Exploration for and Evaluation of Mineral Resource |
|
NFRS 7: Financial Instruments: Disclosures |
|
NFRS 8: Operation Segments |
|
NFRS 9: Financial Instrument |
|
NFRS 10: Consolidated Financial Statements |
|
NFRS 11: Joint Arrangements |
|
NFRS 12: Disclosure of Interest in Other Entities |
|
NFRS 13: Fair Value Measurement |
Click on book cover for Free eBooks
#####
|
Click on link for YouTube videos |
|
|
Accounting Equation |
|
|
Journal Entries in Nepali |
|
|
Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cashbook |
|
|
Trial Balance and Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
|
|
|
Click on link for YouTube videos chapter wise |
|
|
Financial Accounting and Analysis (All videos) |
|
|
Accounting Process |
|
|
Accounting for Long Lived Assets |
|
|
Analysis of Financial Statement |
|
#####
(4) International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) are practically principle-based standards interpretations
International Accounting Standard Boards adopts framework of IFRS.
The International Accounting Standards Board (IASB) took the responsibility to set the various International Accounting Standards from the IASC.
IASB will continue to develop various needed standards which are popularly known as IFRS.
In short, IFRS are the sets of accounting standards which are developed by the IASB.
These standards are global standards in order to prepare the financial statement of Joint Stock Company.
At present more than 166 nations adopted IFRS for their domestic companies which are listed on stock exchange.
Of them, 140 countries have totally conformed to IFRS which are promulgated by IASB.
IFRS includes a statement acknowledging such conformity in their audit reports.
Nepal has adopted IFRS in March 2014.
As such Nepali listed companies are trying to achieve the important milestones while adopting various clauses of the regulations of IFRSs.
Advantage for the conversion from IAS to IFAS:
(a) IFRS helps to raise foreign capital since both the countries use IFRS for their allocating standards i.e. the basis is same.
(b) IFRS helps to present its financial statements in international basis; it becomes easy to comparison.
(c) Subsidiary of a foreign company must use IFRS if its parent company using IFRS.
(d) It helps the foreign investors to invest who are using IFRS.
(e) IFRS uses only English language for its work; it becomes easy to work in case of a foreign company having subsidiary in other countries.
Disadvantages of IFRS
The IFRS is not free from difficulties; some problems are:
(a) Some IFRS issuers resist IFRS because there is not any market incentive for the preparation of IFRS financial statements.
(b) Adopting IFRS is very costly.
(c) IFRS charges cost to conversation.
(e) There is potential impact on banking agreements.
(d) There are hidden dangers compliance with IFRS such as data capture, embedded derivatives, burden on resources, possible system changes etc.
Keep in mind
|
The difference between International Accounting Standard (IAS) and International Financial Reporting Standard (IFRS) |
|
IAS and IRRS are the same. |
|
The difference between them is that IAS represents old accounting standard, IFRS represents new accounting standard. |
|
Such as IAS 17 Leases while IFRS 16 Leases. |
|
IFRS 16 replaces IAS 17 effective from 1 January 2019. |
Arjun EP
EP Online Study
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The post Financial Statement under NFRS| Classification of Accounting Standards appeared first on EP Online Study.
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In Devanagari (Hindi and Nepali), we study swar, vyanjak, a aa i ee, ka kha ga gha, ka kaa ki kee, barahkhadi, kra khra gra
ABCD in Devanagari
देवनागरी एबीसीडी
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
|
a |
b |
c |
d |
e |
f |
g |
h |
i |
j |
k |
|
ए |
बी |
सी |
डी |
इ |
एफ |
जी |
एच |
आय, आइ |
जे |
के |
|
|
|
|
|
|
|
|
|
|
|
|
|
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
|
l |
m |
n |
o |
p |
q |
r |
s |
t |
u |
v |
|
एल |
एम |
एन |
ओ |
पी |
क्यु |
आर |
एस |
टी |
यु |
वी |
|
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|
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W |
X |
Y |
Z |
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|
|
|
w |
x |
y |
z |
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|
|
|
|
|
|
डब्ल्यु |
एक्स |
वाई |
जेड |
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|
Click on the photo for FREE eBooks
Vowel वाउ-अल (वोवेल) = स्वर
|
अ |
आ |
इ |
ई |
उ |
ऊ |
ए |
ऐ |
ओ |
औ |
अं |
अ: |
|
a |
aa |
i |
ee |
u |
oo |
e |
ai |
o |
au |
an |
anh |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consonant कॅन्-स-नन्ट (कन्सो-नेंट) = व्यंजक
|
क |
ख |
ग |
घ |
ङ |
|
ka |
kha |
ga |
gha |
nga |
|
|
|
|
|
|
|
च |
छ |
ज |
झ |
ञ |
|
cha |
chha |
ja |
jha |
nya |
|
|
|
|
|
|
|
ट |
ठ |
ड |
ध |
न |
|
ta |
tha |
da |
dha |
na |
|
|
|
|
|
|
|
प |
फ |
ब |
भ |
म |
|
pa |
fa, pha |
ba |
bha |
ma |
|
|
|
|
|
|
|
य |
र |
ल |
व |
श |
|
ya |
ra |
la |
va, wa |
sha |
|
|
|
|
|
|
|
ष |
स |
ह |
क्ष |
त्र |
|
sha |
sa |
ha |
ksha |
tra |
|
|
|
|
|
|
|
ज्ञ |
|
|
|
|
|
gya |
|
|
|
|
Keep in mind
|
क = ka, qua, ch |
|
Ch = क, च, छ, श [cha च, chha छ, chemistry केमिस्ट्री, chef शेफ |
|
कंचन Kanchan, कंपन kampan, कंपनी company |
#####
|
Click on link for YouTube videos |
|
|
Accounting for Share |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
|
|
Final Accounts in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
|
Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
बारहखड़ी (Barahkhadi)
|
क |
का |
कि |
की |
कु |
कू |
के |
कै |
को |
कौ |
कं |
क: |
|
ka |
kaa |
ki |
kee |
ku |
koo |
ke |
kai |
ko |
kau |
kan |
kah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ख |
खा |
खि |
खी |
खु |
खू |
खे |
खै |
खो |
खौ |
खं |
ख: |
|
kha |
khaa |
khi |
kee |
khu |
koo |
khe |
khai |
kho |
khau |
khan |
khah |
|
|
|
|
|
|
|
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|
|
|
|
|
|
ग |
गा |
गि |
गी |
गु |
गू |
गे |
गै |
गो |
गौ |
गं |
ग: |
|
ga |
gaa |
gi |
gee |
gu |
goo |
ge |
gai |
go |
gau |
gan |
gah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
घ |
घा |
घि |
घी |
घु |
घू |
घे |
घै |
घो |
घौ |
घं |
घः |
|
gha |
ghaa |
ghi |
ghee |
ghu |
ghoo |
ghe |
ghai |
gho |
ghau |
ghan |
ghah |
|
|
|
|
|
|
|
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|
|
|
|
|
|
ङ |
ङा |
ङि |
ङी |
ङु |
ङू |
ङे |
ङै |
ङो |
ङौ |
ङं |
ङ: |
|
nga |
ngaa |
ngi |
ngee |
ngu |
ngoo |
nge |
ngai |
ngo |
ngau |
ngan |
ngah |
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च |
चा |
चि |
ची |
चु |
चू |
चे |
चै |
चो |
चौ |
चं |
च: |
|
cha |
chaa |
chi |
chee |
chu |
choo |
che |
chai |
cho |
chau |
chan |
chah |
|
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छ |
छा |
छि |
छी |
छु |
छू |
छे |
छै |
छो |
छौ |
छं |
छ: |
|
chha |
chhaa |
chhi |
chhee |
chhu |
chhoo |
chhe |
chhai |
chho |
chhau |
chhan |
chhah |
|
|
|
|
|
|
|
|
|
|
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|
|
|
ज |
जा |
जि |
जी |
जु |
जू |
जे |
जै |
जो |
जौ |
जं |
ज: |
|
ja |
jaa |
ji |
jee |
ju |
joo |
je |
jai |
jo |
jau |
jan |
jah |
|
|
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|
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|
|
|
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झ |
झा |
झि |
झी |
झु |
झू |
झे |
झै |
झो |
झौ |
झं |
झ: |
|
jha |
jhaa |
jhi |
jhee |
jhu |
jhoo |
jhe |
jhai |
jho |
jhau |
jhan |
jhah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ञ |
ञा |
ञि |
ञी |
ञु |
ञू |
ञे |
ञै |
ञो |
ञौ |
ञं |
ञ: |
|
na |
naa |
ni |
nee |
nu |
noo |
ne |
nai |
no |
nau |
nan |
nah |
|
|
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|
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|
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|
|
|
|
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|
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ट |
टा |
टि |
टी |
टु |
टू |
टे |
टै |
टो |
टौ |
टं |
ट: |
|
ta |
taa |
ti |
tee |
tu |
too |
te |
tai |
to |
tau |
tan |
tah |
|
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|
|
|
|
|
|
|
|
|
|
|
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ठ |
ठा |
ठि |
ठी |
ठु |
ठू |
ठे |
ठै |
ठो |
ठौ |
ठं |
ठ: |
|
tha |
thaa |
thi |
thee |
thu |
thoo |
the |
thai |
tho |
thau |
than |
thah |
|
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|
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|
|
|
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|
|
|
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ड |
डा |
डि |
डी |
डु |
डू |
डे |
डै |
डो |
डौ |
डं |
ड: |
|
da |
daa |
di |
dee |
du |
doo |
de |
dai |
do |
dau |
dan |
dah |
|
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|
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|
|
|
|
|
|
|
|
|
|
ढ |
ढा |
ढि |
ढी |
ढु |
ढू |
ढे |
ढै |
ढो |
ढौ |
ढं |
ढ: |
|
dha |
dhaa |
dhi |
dhee |
dhu |
dhoo |
dhe |
dhai |
dho |
dhau |
dhan |
dhah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ण |
णा |
णि |
णी |
णु |
णू |
णे |
णै |
णो |
णौ |
णं |
ण: |
|
na |
naa |
ni |
nee |
nu |
noo |
ne |
nai |
no |
nau |
nan |
nah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
त |
ता |
ति |
ती |
तु |
तू |
ते |
तै |
तो |
तौ |
तं |
त: |
|
ta |
taa |
ti |
tee |
tu |
too |
te |
tai |
to |
tau |
tan |
tah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
थ |
था |
थि |
थी |
थु |
थू |
थे |
थै |
थो |
थौ |
थं |
थ: |
|
tha |
thaa |
thi |
thee |
thu |
thoo |
the |
thai |
tho |
thau |
than |
thah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
द |
दा |
दि |
दी |
दु |
दू |
दे |
दै |
दो |
दौ |
दं |
द: |
|
da |
daa |
di |
dee |
du |
doo |
de |
dai |
do |
dau |
dan |
dah |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ध |
धा |
धि |
धी |
धु |
धू |
धे |
धै |
धो |
धौ |
धं |
ध: |
|
dha |
dhaa |
dhi |
dhee |
dhu |
dhoo |
dhe |
dhai |
dho |
dhau |
dhan |
dhah |
|
|
|
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|
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|
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न |
ना |
नि |
नी |
नु |
नू |
ने |
नै |
नो |
नौ |
नं |
न: |
|
na |
naa |
ni |
nee |
nu |
noo |
ne |
nai |
no |
nau |
nan |
nah |
|
|
|
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प |
पा |
पि |
पी |
पु |
पू |
पे |
पै |
पो |
पौ |
पं |
प: |
|
pa |
paa |
pi |
pee |
pu |
poo |
pe |
pai |
po |
pau |
pan |
pah |
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फ |
फा |
फि |
फी |
फु |
फू |
फे |
फै |
फो |
फौ |
फं |
फ: |
|
fa |
faa |
fi |
fee |
fu |
foo |
fe |
fai |
fo |
fau |
fan |
fah |
|
pha |
phaa |
phi |
phee |
phu |
phoo |
phe |
phai |
pho |
phau |
phan |
phah |
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ब |
बा |
बि |
बी |
बु |
बू |
बे |
बै |
बो |
बौ |
बं |
ब: |
|
ba |
baa |
bi |
bee |
bu |
boo |
be |
bai |
bo |
bau |
ban |
bah |
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भ |
भा |
भि |
भी |
भु |
भू |
भे |
भै |
भो |
भौ |
भं |
भ: |
|
bha |
bhaa |
bhi |
bhee |
bhu |
bhoo |
bhe |
bhai |
bho |
bhau |
bhan |
bhah |
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म |
मा |
मि |
मी |
मु |
मू |
मे |
मै |
मो |
मौ |
मं |
म: |
|
ma |
maa |
mi |
mee |
mu |
moo |
me |
mai |
mo |
mau |
man |
mah |
|
य |
या |
यि |
यी |
यु |
यू |
ये |
यै |
यो |
यौ |
यं |
य: |
|
ya |
yaa |
yi |
yee |
yu |
yoo |
ye |
yai |
yo |
yau |
yan |
yah |
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र |
रा |
रि |
री |
रु |
रू |
रे |
रै |
रो |
रौ |
रं |
र: |
|
ra |
raa |
ri |
ree |
ru |
roo |
re |
rai |
ro |
rau |
ran |
rah |
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ल |
ला |
लि |
ली |
लु |
लू |
ले |
लै |
लो |
लौ |
लं |
ल: |
|
la |
laa |
li |
lee |
lu |
loo |
le |
lai |
lo |
lau |
lan |
lah |
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व |
वा |
वि |
वी |
वु |
वू |
वे |
वै |
वो |
वौ |
वं |
व: |
|
va |
vaa |
vi |
vee |
vu |
voo |
ve |
vai |
vo |
vau |
van |
vah |
|
wa |
waa |
wi |
wee |
wu |
woo |
we |
wai |
wo |
wau |
wan |
wah |
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श |
शा |
शि |
शी |
शु |
शू |
शे |
शै |
शो |
शौ |
शं |
श: |
|
sha |
shaa |
shi |
shee |
shu |
shoo |
she |
shai |
sho |
shau |
shan |
shah |
|
ष |
षा |
षि |
षी |
षु |
षू |
षे |
षै |
षो |
षौ |
षं |
ष: |
|
sha |
shaa |
shi |
shee |
shu |
shoo |
she |
shai |
sho |
shau |
shan |
shah |
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स |
सा |
सि |
सी |
सु |
सू |
से |
सै |
सो |
सौ |
सं |
स: |
|
sa |
saa |
si |
see |
su |
soo |
he |
sai |
so |
sau |
san |
sah |
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ह |
हा |
हि |
ही |
हु |
हू |
हे |
है |
हो |
हौ |
हं |
ह: |
|
ha |
haa |
hi |
hee |
hu |
hoo |
he |
hai |
ho |
hau |
han |
hah |
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क्ष |
क्षा |
क्षि |
क्षी |
क्षु |
क्षू |
क्षे |
क्षै |
क्षो |
क्षौ |
क्षं |
क्ष: |
|
ksha |
kshaa |
kshi |
skhee |
kshu |
kshoo |
kshe |
kshai |
ksho |
kshau |
kshan |
kshah |
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त्र |
त्रा |
त्रि |
त्री |
त्रु |
त्रू |
त्रे |
त्रै |
त्रो |
त्रौ |
त्रं |
त्र: |
|
tra |
Traa |
tri |
tree |
tru |
troo |
tre |
trai |
tro |
trau |
tran |
trah |
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ज्ञ |
ज्ञा |
ज्ञि |
ज्ञी |
ज्ञु |
ज्ञू |
ज्ञे |
ज्ञै |
ज्ञो |
ज्ञौ |
ज्ञं |
ज्ञ: |
|
gya |
gyaa |
gyi |
gyee |
gyu |
gyoo |
gye |
gyai |
gyo |
gyau |
gyan |
gyah |
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#####
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Click on the link for YouTube videos: |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cash Book |
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Trial Balance & Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Final Accounts: Class 11 |
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Adjustment in Final Accounts |
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Capital and Revenue |
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Single Entry System |
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Non-Trading Concern |
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Government Accounting |
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Goswara Voucher (Journal Voucher) |
|
######
क्र, ख्र, ग्र (Kra, Khra, Gra)
|
क्र |
ख्र |
ग्र |
घ्र |
च्र |
छ्र |
ज्र |
झ्र |
ट्र |
ड्र |
थ्र |
द्र |
|
kra |
khra |
gra |
ghra |
chra |
chhra |
jra |
jhra |
tra |
dra |
thra |
dra |
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ध्र |
न्र |
प्र |
फ्र |
ब्र |
भ्र |
म्र |
य्र |
ल्र |
व्र |
ह्र |
त्र |
|
dha |
nra |
pra |
fra |
bra |
bhra |
mra |
yra |
lra |
vra |
hra |
tra |
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कृ |
गृ |
घृ |
तृ |
दृ |
नृ |
पृ |
मृ |
वृ |
सृ |
श्री |
|
|
kri |
gri |
ghri |
tri |
dri |
nri |
pri |
mri |
vri |
sri |
shree |
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जय गूगल. जय युट्युब, जय सोशल मीडिया
The post Swar | Vyanjak | A Aa I Ee | Ka Kha Ga Gha | Ka Kaa Ki Kee | Barahkhadi | Kra Khra Gra appeared first on EP Online Study.
]]>The post ABCD | British Phonetic ABCD | American Phonetic ABCD | ABCD in Devanagari appeared first on EP Online Study.
]]>
Do You Know ABCD?
In ABCD, we will study Normal ABCD in capital letters and small letters, Phonetic ABCD, New Phonetic ABCD and ABCD in Devanagari.
Normal ABCD… in CAPITAL letters (UPPERCASE)
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
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L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
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W |
X |
Y |
Z |
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Normal ABCD… in small letters (lowercase)
|
a |
b |
c |
d |
e |
f |
g |
h |
i |
j |
k |
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l |
m |
n |
o |
p |
q |
r |
s |
t |
u |
v |
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w |
x |
y |
z |
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Click on the photo for FREE eBooks
British Phonetic ABCD
ब्रिटिश फनेटिक (फोनेटिक) एबीसीडी
|
eɪ |
biː |
siː |
diː |
iː |
ef |
dʒiː |
eɪtʃ |
aɪ |
dʒeɪ |
keɪ |
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
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el |
em |
en |
əʊ |
piː |
kjuː |
ɑː(r) |
es |
tiː |
juː |
viː |
|
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
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|
ˈdʌbljuː |
eks |
waɪ |
zed |
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W |
X |
Y |
Z |
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|
#####
|
Click on the link for YouTube videos: |
|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
######
American Phonetic ABCD
अमेरिकन फनेटिक (फोनेटिक) एबीसीडी
|
eɪ |
biː |
siː |
diː |
iː |
ef |
dʒiː |
eɪtʃ |
aɪ |
dʒeɪ |
keɪ |
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
|
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|
el |
em |
en |
oʊ |
piː |
kjuː |
ɑːr |
es |
tiː |
juː |
viː |
|
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
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|
ˈdʌbljuː |
eks |
waɪ |
ziː |
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W |
X |
Y |
Z |
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Keep in Mind (KIM)
|
Normal |
British |
American |
|
|
O |
əʊ |
oʊ |
|
|
R |
ɑː(r) |
ɑːr |
Note: all the others alphabets are same in British and American |
|
Z |
zed |
ziː |
|
New Phonetic ABCD
न्यु फनेटिक (फोनेटिक) एबीसीडी
|
ay |
bee |
see |
dee |
ee |
ef |
jee |
aych |
ī |
jay |
kay |
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
|
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el |
em |
en |
ō |
pee |
kyoo |
aar |
ess |
tee |
yoo |
vee |
|
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
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|
dúbb’l yoo |
eks |
wī |
zee |
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W |
X |
Y |
Z |
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ABCD in Devanagari
देवनागरी एबीसीडी
|
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
|
a |
b |
c |
d |
e |
f |
g |
h |
i |
j |
k |
|
ए |
बी |
सी |
डी |
इ |
एफ |
जी |
एच |
आय, आइ |
जे |
के |
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L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
|
l |
m |
n |
o |
p |
q |
r |
s |
t |
u |
v |
|
एल |
एम |
एन |
ओ |
पी |
क्यु |
आर |
एस |
टी |
यु |
वी |
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W |
X |
Y |
Z |
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w |
x |
y |
z |
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डब्ल्यु |
एक्स |
वाई |
जेड |
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EP Online Study
Thank you for investing your time.
Please comment on the article and share this post on your social media platform.
Jay Google, Jay YouTube, Jay Social Media
जय गूगल. जय युट्युब, जय सोशल मीडिया
The post ABCD | British Phonetic ABCD | American Phonetic ABCD | ABCD in Devanagari appeared first on EP Online Study.
]]>The post The Half-closed Eyes of the Buddha and the Slowly Sinking Sun | All Solution | NEB English Class 12 | Short Story Q&A appeared first on EP Online Study.
]]>
The Half-closed Eyes of the Buddha and the Slowly Sinking Sun | All Solution | NEB English Class 12 | Short Story Q&A
Glossary of The Half-closed Eyes of the Buddha and the Slowly Sinking Sun
(In Alphabetical order)
Adinath (n): name of the Lord Shiva
adrift (adj): a boat moving on the water uncontrolled
adrift (v): cut off from something
alleyway (n): street, footpath
alms (n): money or goods given to the poor as charity
appetite (n): hunger; desire
arid (adj): too dry or barren to support vegetation
atmosphere (n): environment
bestowed (v): provided; given; granted
blister (n) a small bubble on the skin filled with serum and caused by friction and burning
chisel (n): wood, stone or metal shaping tool made of iron
Chobhar (n): a village in Kathmandu
cleft (n): fracture or split on the rock
cling (v): grip, hold
coexistence (n): living or existing at the same time or in the same place
confine (n): edge, brim
congealed (adj): having become semisolid
contamination (n): impurity; adulteration
courtyard (n): verandah; square
deities (n): god and goddess
devoid (adj): empty; free from
dizzy (adj): faint; giddy
embrace (v, n): cuddle, hug
emulate (v): imitate; copy; mimic
enchantment (n): charm, magic
enclosure (n): act of enclosing.
endeavor (v): try hard to do
endure (v): suffer pain or difficulty patiently
every nook and cranny (idiom): every place; everywhere
extinguish (v): cease to burn or shine
Four Passes (n.): Chaar Bhanjyang (Older name of the Kathmandu Valley)
garble (v): manipulate; misrepresent
gaze (v, n): look steadily and intently, especially in admiration, surprise or thought; stare
gleam (v): shine brightly
heed (v): pay attention to; take notice of
incarnation (n): avatar; person who embodies in the flesh a deity, spirit or abstract quality
indebted (adj): grateful, obliging
indulgence (n): addiction; fascination
inscribed (adj): engraved; marked with characters and letters
inscriptions (n) record
insignificance (v): seem unimportant
lattice (n, adj): web structure; jaalo
multifarious (adj): many and of various types
multifarious (adj.): many and of various types
obscure (v): unclear; darken
peasant (n): farmer
perceive (v): observe; notice
perception (n): judgment; ability to see through sense
perhaps (adv): may be; probably
preach (n): moral lecture; religion lecture
preordain (v): predetermine
prosperous (adj): rich, successful
ribald (adj): rude; impolite; ribald (n)
shrine of Shiva (n): temple of Shiva
sight (n): power of seeing
smear (v): spread
strike (v): hit
unabashed (adj): immovable; calm; stable
virtue (n): morality, good behavior
Click on the photo for FREE eBooks
Characters in The Half-closed Eyes of the Buddha and the Slowly Sinking Sun
The tourist
A Westerner guest who holds aesthetic vision regarding Nepal based on her study in history, culture and religion.
The guide
A Nepalese tourist guide having good knowledge about the Nepalese art, culture, geography and religion but has a feeling of inferiority in comparison to the westerners.
A farmer family
A farmer family is living in a remote village; they have high faith, intimacy, kindliness and gratitude in themselves.
A paralyzed child
A boy who suffers from Polio disorder; neither he can speak properly nor he can move his body parts except his eyes.
The Half-closed Eyes of the Buddha and the Slowly Sinking Sun
Oh guide, you do not, you cannot understand the joy we Westerners feel when we first, set foot upon the soil of your country!
As the Dakota crosses the Four Passes, we see this green valley with its geometric fields, its earthen houses of red, yellow, and white. The scent of soil and mountains is in the air, arid there’s an age-old peacefulness in the atmosphere. You were born amongst all of this, and so perhaps you feel that the embrace of these blue hills’ outspread arms confines you. But we live in the plains or beside the sea. Our vision founders on a horizon of land or sea, and so we know the affection with which the breast of these hills forever clings to your sight. You have never had to suffer the feeling of insignificance that is caused by a vast distance. Perhaps we are always adrift in vastness, my friend; perhaps that is why this, your enclosure, appeals to us! Has it ever occurred to you that the half-closed eyes of the Buddha seem to welcome you, even at the airport? It is as if one acquires a calmness, as if one is returning once more to a resting place.
You have always known only how to give to the West. You’ve given us religion arid the Puranas, images of brass and ornaments of ivory, manuscripts of palm leaves and inscriptions on copperplate. You gave us a civilization and its wisdom and garlands of jasmine flowers around our necks. You have continued in your giving, ignorant of what others call “taking,” innocent of the notion of ownership. The very word indulgence is unknown to you. My friend, I know your history. Before I came here, I spent several years in our libraries, leafing through the pages of your priceless volumes. You are a guide who will lead me down the streets and alleyways of the present, but I could take you along your ancient ways. Even now I can see it clearly: the valley is filled with water, and a lotus flower blooms where Swyambhunath now stands. Manjushri strikes with his sword at Chobhar. I see monks and nuns receiving alms and spreading the law in the nooks and crannies of the Kasthamandap. Behold the eyes of these shavenheaded monks. You cannot meet their gaze! It is called the samyak gaze. Do you know what that means? It is perception, pure and without contamination; sight that perceives everything in its true form. I’ll have just one more drink before dinner….
You live in a house like a temple, but you are unaware of its beauty, its enchantment. In these wooden images, these multifarious ornamentations, these many styles, there is the flowing music of a chisel in the hands of an artist. Do you not feel it? Tell me about those happy, prosperous young artists working in the fields all day and creating beautiful images of their personal deities in their spare time, who are now covered by the dusts of the past.
Once, an artist was adding the finishing touches to a wooden image when his fair, tiny wife came by, carrying her baby on her back, and poured him Raksi from a jug. The foam bubbled over and congealed. Is it true that it was that foam that inspired the artist to construct a roof of tiles? Oh, your land is truly great, this country where so many different cultures found their home. Aryans, non-Aryans, Hindus, and Buddhists all came and obtained a rebirth here. It must be the effect of your country’s soil, my friend; it was the soil that enabled all these races to flourish together here. Come, I’ll drink one more small one, it’s not dinner time yet…
I am greatly indebted to you for you have served me both Nepali and Newari food. Ah, momos… Just picture the scene: it is winter and an old man sits in the upper story of his house, lit only by the fire. Perhaps the smoke is filling the room like fog from floor to ceiling. Perhaps he is telling his grandson about each and every Nepali item that Princess Bhrikuti took with her when King Amshu Varma sent her off to Tibet. The old lady smokes tobacco from a bamboo hookah, and, mindful of the old man, she carries on making fresh mo-mos. The son’s wife puts some of them onto a brass plate, and the old man’s words are garbled and obscured by his mouthful. The grandson laughs, and the old man tries to swallow quickly, so he burns his tongue and, unabashed, pours out a stream of ribald curses. . . .
These are scenes that cannot be read in an old book in a library, and that is why I’ve had to come to Kathmandu and soak myself in its atmosphere, for which I’m greatly obliged to you. . . . Now, cheers once again, to your great country, and to mine!
Oh, and another thing that is not to be found in any book is the smile on the faces of these people. It is a smile of welcome, as if our meeting were neither accidental nor our first. It’s as if I was the farmer’s eldest son, coming home after a long day’s work in the fields, as if my labors had been fruitful and I was content and at ease with my father. It’s as if I have taken the world’s most beautiful woman for my wife and have brought her along behind me, and my mother is smiling a welcome from the door. It’s as if my sister’s husband and I were the closest of friends and we, her brother and her husband, were coming along with our arms around one another, singing songs of drunkenness. It’s as if—I cannot explain; however much I try, I cannot describe it fully. That smile is full of wisdom; it is a smile from the soul, a smile peculiar to this place. . . . One more drink, to your Nepalese smile, that sweet smile!
And then there are the eyes. The eyes of the carved lattice windows, the eyes painted on the door panels. The eyes on the stupas, the eyes of the people. And the eyes of the Himalaya, which peep out from the gaps between the hills like those of a neighbor’s boy when he jumps up to see the peach tree in your garden. This is a land of eyes, a land guarded by the half-closed eyes of the Lord Buddha.
Even if all of the world’s history books were destroyed today, your eyes would build a new culture; they would reassemble a civilization. My appetite for eyes is still not satiated. Tomorrow I shall go to a lonely place where there is a stupa with eyes that are clear. There I want to see the pleasant light of sunset reflected in the eyes of the Buddha. Show me beautiful, full eyes, eyes without equal, eyes whose memory will make this journey of mine unforgettable…. Come, let’s go to eat dinner.
Come, my guest; today I am to show you some eyes.
This is Chobhar Hill, where you people come to see the cleft that was made by Manjushri’s sword and the outflow of the Bagmati River. Today I’ll take you up the hill where few of our guests ever go and no tourist’s car can proceed. There (in your words) the dust of time has not yet covered the culture of the past. Do you see this worn old rock? A young village artist has drawn some birds on it. Nearby, he has sketched a temple, leaving out any mention of the religion to which it belongs. Further up the hill, in the middle of the village, stands the temple of Adinath. In the temple courtyard there is a shrine of Shiva, several Buddha images, and many prayer wheels, inscribed Om mani padme hu.” You say it is a living example of Nepalese tolerance and coexistence. Children play happily there, unconcerned by the variety of their gods, religions, and philosophies. But my guest, I will not take you there.
You have already seen much of such things, and you have understood them and even preached them. Today I’ll take you to a house where I feel sure you will find the pulse of our reality. They are a farmer’s family, probably owning a few fields here and there, where they work and sweat to pay off half the proceeds to someone in the city. There is no smoke to fill their upstairs room, they cook no mo-mos in their hearth, nor do they discuss Bhrikuti’s dowry in their winters. There is a child in the home, who is certainly no divine incarnation, either. Attacked by polio and born into a poor farmer’s household, the child is surely incapable of spreading the law or of making any contribution to this earth. He has taken birth here in one of his maker’s strangest forms of creation.
And moreover, my friend—oh, the climb has tired you; would you like some filtered water from the thermos flask?—my intention is not to show him to you as any kind of symbol. Yesterday you were swept along by waves of emotion, inspired by your “Black and White” whisky, and you urged me to show you eyes that would forever remind you of your visit to Nepal. So I have brought you here to show you eyes like that.
The child’s whole body is useless; he cannot speak, move his hands, chew his food, or even spit. His eyes are the only living parts of his body and it is only his eyes that indicate that he is actually alive. I don’t know whether his eyes have the samyak gaze or not. I don’t even understand the term, but his face is certainly devoid of all emotion. His gaze is uninterested, without resolution or expression; it is inactive and listless, unexercised and lacking any measure of contemplation. (Perhaps I have begun to speak unwittingly in the terms of the Aryan eightfold path, which will either be your influence or a virtue bestowed upon me by the child.)
My guest, these are the eyes you wanted. A living being accumulates many capabilities in one lifetime. It feels happy and it smiles; it feels sad and it weeps. If it feels cold, it seeks warmth, and if it is hungry, it prepares food to eat. It seeks to learn what it doesn’t already know, and it succeeds or it fails. It has many experiences, some bitter, some sweet, and these it relates when company, occasion, and mood seem suited. How commonplace all of these actions are! My guest, yesterday you said that we Eastern peoples were always making contributions to the West, did you not? (Shall I give you some water? Are you out of breath?) Here is a child who can neither give nor take anything at all. Just put yourself in his position for a moment. You want your finger to do something, but your finger refuses. You want to speak, but speech will not come to you. Every vein, nerve, and bone is powerless to heed the commands of your brain, and yet . . . you are alive. I know that this disease occurs in your country, too. But the ability to endure it and to maintain a total indifference in the eyes, even, perhaps, to foster the samyak gaze, this capacity for remaining speechless, inactive, powerless, and immobile, and yet to survive without complaint . . . this can surely only be found in an Easterner!
Come, come closer. I have lied to his parents; I have told them that you are a doctor. Look . . . their faith in you shows in their eyes. There is intimacy, kindliness, and gratitude in their eyes, as if your coming here were preordained. That smile you described is on their faces, as if you were their eldest son who has brought a liferestoring remedy across the seven seas for your brother. The old peasant woman is smiling, isn’t she? It’s as if she’s rejoicing at the birth of her first grandchild from your wife, the beauty of the world. I know that this same smile will remain on their faces as long as you are here. I know that it will be extinguished when you turn to go. Once you’ve gone they’ll sink back into the same old darkness.
The child has a sister whose body functions properly. He watches her as she crawls around, picking up everything she comes across and putting it into her mouth, knocking over the beer, overturning the cooking stone. Just for an instant, the ambition to emulate her is reflected in his eyes, but then it is reabsorbed into the same old indifference. Once his mother was scolding his sister, and a light gleamed in his eyes. I couldn’t tell you to which era its vision belonged, but I realized that he wanted to speak. With a gaze devoid of language, gesture, or voice, he wanted to say, “Mother, how can you appreciate what fun it is to fall over? To crawl through the green dub grass and rub the skin off your knees, to shed a couple of drops of blood like smeared tears, and graze your flesh a little. To feel pain and to cry, to call out for help. That pain would be such a sweet experience. She can rub her snot or spittle into her own grazes, or pull out the thorn that has pricked her, and throw it away. Or she could pull off a scab that has healed over a buried splinter of glass or spend a few days resting under her quilt. She can climb up onto the storage jar to try to pull a picture down from the wall, and when the peg slips out and the picture falls and the glass smashes with a wonderful noise, she feels a wave of fear as she realizes her guilt. She has grown up, learning from experience the facts that fire can burn her and water makes her wet, that nettles cause blisters and beer makes her dizzy. That if she falls she might be hurt or break a bone that if something else falls it will probably break. That if someone dies, she is able to weep, and if someone laughs, she can laugh right back; if someone makes fun of her, she can strike them, and if someone steals from her, she can steal from them. My sister, who learns arid remembers each and every new word she hears, is the result of the self-sacrificing practice of thousands of years of human language. She embodies a history, a tradition, and a culture, and it is in her very ability to speak that the future is born. But not in one like me, who cannot even move his lips. In my body, in its strength and gestures, an unbroken cycle of historical and human development has come to its conclusion. A long labor, a chain of events, a lengthy endeavor, and an endlessness are all at an end. The future ends and is broken abruptly.”
And these are the eyes, my guest, that look at you but see nothing; this is the gaze that is incapable of self-manifestation. This is beauty that is complete and has no other expression.
These are eyes surrounded by mountains; their lashes are rows of fields where rice ripens in the rains and wheat ripens in the winter.
These are the eyes that welcome you, and these are eyes that build. And in these eyes hides the end of life. Look! They are just as beautiful as the setting sun’s reflection in the eyes of the Buddha!
Shankar Lamichhane
Courtesy: Himalayan Voices: An Introduction to Nepali Literature
About the Author | About Shankar Lamichhane
Shankar Lamichhane (1928-1975) was born in Kathmandu but lived in Banaras with his uncle at a young age.
He completed his college education at Tri-Chandra College in Kathmandu.
He worked for several governmental and cultural institutions in Kathmandu.
Later, he became the manager of a handicrafts store.
Shankar Lamichhane was an admirer of modern American fiction and frequently mixed with foreign visitors to Nepal.
He considered one of Nepal’s foremost essayists of all times.
He wrote with a lyrical, musical tempo, unrestrained by the ponderous language that often mars the essays of his elders, peers or followers.
He died an untimely death at the age of 48, but had stopped writing before that.
He was blamed for an anonymous accusation of plagiarism.
Later, he accepted an accusation.
However, his fresh and playful style greatly enriched Nepali literature is indisputable.
His collection ‘Abstract Chintan: Pyaz’ shows off his light touch in dealing with both intimate and metaphysical subjects.
His masterpiece ‘Abstract Chintan: Pyaz’ won him the Madan Puraskaar in 2024 Bikram Samwat.
‘Shankar Lamichhane Essay Society’ was established in his honour.
This story is taken from ‘Himalayan Voices: An Introduction to Nepali Literature’ translated by Michael Hutt.
The story deals with the monologues of two characters; a tourist guide and a foreign tourist.
Keep in mind
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Madan Puraskar (Madan Award) is a literary honour in Nepal. It is considered the most prestigious literature award in Nepal. Madan Puraskar Guthi confers annually for an outstanding book in the Nepali language published within the calendar year. It is awarded on the day of Ghatasthapana every year alongside Jagadamba Shree Puraskar. |
Summary of The Half-closed Eyes of the Buddha and the Slowly Sinking Sun
“The Half-Closed Eyes of the Buddha and the Slowly Sinking Sun” by Shankar Lamichhane is a simple story.
It is a discussion between two characters; a tourist and a guide.
It is taken from the ‘Himalayan Voice: An Introduction to Modern Nepali Literature’
It was released in 1991.
The story is set in Nepal’s capital city Kathmandu.
In the story, both of the characters Nepali guide and foreign tourist act as narrators.
The story begins with a pleasant atmospheric description of the Kathmandu valley.
It describes visual beauty like colours of homes, blue hills and so on.
Then the guest remarks that the East has contributed so many things to the West.
They are the Purans, ancient tools, ivory ornaments, palm leaf manuscripts and copperplate inscriptions.
The guide also tells the stories of Manjushri and how he stroked with his sword at Chobhar.
Later, people are allowed to settle in Kathmandu Valley.
They discuss their passion for wooden figures, Nepalese folk music and various cultures.
They also discuss about Aryans, non-Aryans, Hindus and Buddhists..
The tourist expresses gratitude to the guide for supplying him with Nepali and Newari cuisine.
They examine the lives and histories of Princess Bhrikuti and King Amshuvarma.
Wherever the tourist goes, people welcome him with smile; the tourist is overjoyed with this act.
Nepalese people have good hospitable behaviour.
Then they explore other types of eyes, such as the eyes in the windows, the eyes on the door panels, the eyes on the stupas, the eyes of the people, the eyes of the Himalaya, and the half-closed eyes of the Lord Buddha, referring to the country as a land of eyes.
These eyes reveal a new culture, a diversity of religions, civilisation, vivid memories, and a long trip.
The guide tells about the temple of Adinath, the Shiva shrine encircled by several other pictures of Buddha- a living example of Nepalese tolerance and coexistence- but the guide takes the guest to a house where he discovers the pulse of reality.
It’s a farmer’s family with a paralysed youngster (polio-affected boy) whose entire body is worthless and he can’t speak, move his hands, chew his food, or even spit, except for his eyes, which are just opposite his sister’s.
As the guide introduces the visitor as a doctor, the parents are overjoyed.
In their eyes, there is a depth of faith, connection, kindness, and thankfulness.
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Understanding the text
Answer the following questions:
(a) How does the tourist describe his initial impression of the Kathmandu valley?
The tourist describes his initial impression of the Kathmandu as green valley, geometric fields, colourful buildings, the aroma of soil and mountains in the air.
(b) According to the tourist, why is the West indebted to the East?
According to the tourist, the Western county is indebted to the Eastern county for the pleasant atmosphere, religious and cultural sculptures, the Purans, ivory ornaments, manuscripts of palm leaves, brass and copper images etc.
(c) How does the tourist interpret the gaze of the monks and nuns?
The tourist interprets the gaze of the monks and nuns as ‘the samyak gaze.’
He refers to monks as gaze and nuns as ‘samyak gaze.’
Samyak gaze denotes pure and uncontaminated perception.
(d) Why do the tourists think Nepali people are wonderful and exceptional?
The tourists think Nepali people are wonderful and exceptional because they create exceptional wooden images.
They create numerous ornamentations and images of deities.
They also create enchanting music from traditional musical instruments.
Nepalese have hospitable behaviour.
(e) What are the different kinds of communities in the Kathmandu valley and how do they co-exist with each other?
The different kinds of communities co-exist in the Kathmandu valley.
They are Aryans, non-Aryans, Hindus, and Buddhists.
They live in peaceful harmony with each other.
(f) What does the tourist feel about the temple of Adinath?
The tourist feels the Adinath temple is a live example of Nepalese tolerance and coexistence.
The tourist feels great about the Adinath temple (the temple of Shiva).
(g) Why does the guide take the tourist to the remote village?
The guide takes the tourist to a remote village to show different realities.
The guide wants to show the tourist about poverty, hard labour, miserable living and a clean environment.
(h) What does the innocent village couple think of the doctor?
The innocent village couple thinks the doctor is the ray of hope for life.
They are in a miserable state.
Their eyes seem quite optimistic after meeting the doctor.
(i) What are the differences between the paralyzed child and his sister?
The difference between the paralyzed child and his sister are as follow:
The child’s entire body is paralyzed but his sister is disease free.
He cannot speak but his sister can.
He cannot crawl and move his hand but his sister can.
(j) Why does the guide show the instances of poverty to the tourist?
The guide shows the instances (examples) of poverty to the tourist so that he understands the reality of the poverty of people living in remote locations.
The guide wants to show the tourist about poverty, hard labour, miserable living etc.
Reference to the context
(a) Which narrative technique is used by the author to tell the story? How is this story different from other stories you have read?
The author uses the stream of consciousness technique to narrate the story “The Half-closed Eyes of the Buddha and the Slowly Sinking Sun.” by Shankar Lamichhane.
This story differs from others because I have read most other stories where first person describes.
The stream of consciousness technique is a style or technique of writing that tries to capture the natural flow of a characters extended thought process.
It is done by incorporating sensory impressions, incomplete ideas, recollections, unfinished thoughts, unusual syntax and rough grammar.
It is used primarily in fiction and poetry; but the term has also been used to describe plays and films that attempt to visually represent a character’s thoughts.
This story is told through the monologues of two characters; a tourist guide and a foreign tourist in Kathmandu Valley.
The story uses a stream of consciousness technique to capture what the two protagonists think rather than portraying actions and events.
I have not found the stream of consciousness technique in other stories which I have read.
(b) How is the author able to integrate two fragments of the narration into a unified whole?
The author of the story “The Half-Closed Eyes of the Buddha and the Slowly Sinking Sun” is able to integrates two fragments or pieces of narration into a unified whole by connecting them with instances of eyes.
He is able to associate them with two different examples in term of ‘eyes’.
The stream of consciousness technique is a style or technique of writing that tries to capture the natural flow of a characters extended thought process.
It is done by incorporating sensory impressions, incomplete ideas, recollections, unfinished thoughts, unusual syntax and rough grammar.
The author explains ii detailing events that are happening in the community.
Thus, he conveys the message by connecting two separate worlds of the East and the West,
(c) The author brings some historical and legendary references in the story. Collect these references and show their significance in the story.
The author of the story “The Half-Closed Eyes of the Buddha and the Slowly Sinking Sun” brings some historical and legendary references.
The references and their significance are as follows:
Manjushri and his sword stroke at Chobhar indicates the Bagmati River to overflow,
It represents her contribution to allowing people to live in the valley.
The Puranas, brass and ivory ornaments, palm leaf manuscripts, copperplate writings demonstrate culture and arts.
They show that the Nepalese people are rich in culture, traditions, religions and arts.
The eyes of the shaven-headed monks and nuns represent ‘the samyak gaze’.
‘The samyak gaze’ implies pure and unadulterated perception.
The mention of Princess Bhrikuti and King Amshu Varma is related to the relationship.
It illustrates historical relationships with neighbouring countries of Nepal.
The beautiful light of the sunset indicates the half closed eyes of Buddha.
It shows Nepal as a country of Buddha.
It represents hope, security, peace, harmony, sentiments, beauty etc.
The Adinath (God Shanker) is an example of tolerance.
It is an example of tolerance and togetherness of Nepalese.
(d) The author talks about the eyes in many places: the eyes of the shaven monks and nuns, eyes in the window and door panels, the eyes of the Himalayas, the eyes of the paralyzed boy, the eyes of the welcoming villagers and above all the half-closed eyes of the Buddha. Explain how all the instances of eyes contribute to the overall unity of the story.
In the story “The Half-closed Eyes of the Buddha and the Slowly Sinking Sun” the author talks about the eyes in many places.
They are connected as under:
The eyes of shaven monks and nuns
It indicates ‘the samyak gaze’ or gaze of purity.
It means the sight that perceives everything in its true form.
Eyes in the window and door panels
It indicates feature of traditional Nepalese architecture.
The decorative windows have been described as a symbol of Newar culture and artistry
The eyes of the Himalayas
The view the Himalayas is supremely sacred.
The eyes of the Himalayas indicate seeing of the god in every atom of the universe.
The eyes of the paralyzed boy
These eyes are as beautiful as the setting sun’s reflection.
They seem as the eyes of the Buddha.
The eyes of the paralyzed boy hide the end of life.
The eyes of the welcoming villagers
The guide introduces the visitor as a doctor.
The poor parents are overjoyed.
In their eyes, there is a depth of faith, connection, kindness and thankfulness.
The half-closed eyes of the Buddha
The half-closed eyes of Buddha indicate that Buddha is protecting Nepal.
Here, Nepalese people feel peace and warm through Buddha.
These all eyes represent Nepal as a rich in culture, religion, tradition and arts.
If the history books destroy, these eyes will again create a new culture, religion, tradition and arts.
Thus, the author connects all these eyes for the overall unity of the story.
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Basic Journal Entries in Nepali |
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Subsidiary Book |
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Adjustment in Final Accounts |
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Goswara Voucher (Journal Voucher) |
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Reference beyond the text
(a) Write an essay on Living Proximity to Nature.
Living Proximity or Closeness to Nature
We see nature around us.
Nature includes trees, flowers, plants, animals, the sky, the sun, the moon, mountains, air, forests and so on.
It provides oxygen, food, water, shelter, medicines, clothing materials and much more to the living things.
It is so great and beyond human imagination.
It is the most powerful than any other.
Nature never demands anything from humans.
For living things, it is not possible to survive without nature.
We should respect all the natural things because life on this planet is possible due to incredible nature.
Nature nourishes life from all sides.
Sometimes, nature destroys by flood, land sliding, tsunami, cyclone, tornado, drought, volcano and so on.
Nature is a most precious gift provided by God to us.
We should to enjoy the nature but not to harm it.
Nature is the most beautiful part of our life.
It makes us happy and let us natural environment to live healthily.
We should always try to conserve nature for our healthy future as well as for the next generation.
(b) The story talks about ethnic/religious co-existence of different communities in Nepal, where the Buddhists and the Hindus and the Aryans and non-Aryans have lived in communal harmony for ages. In your view, how have the Nepali people been able to live in such harmony?
In the story “The Half-closed Eyes of the Buddha and the Slowly Sinking Sun” the author talks about the ethnic and religious co-existence of different communities in Nepal.
Nepal is a small and beautiful country.
There are historical, cultural, political and geographical factors.
The Buddhists, the Hindus, the Aryans and non-Aryans have lived in communal harmony for ages.
From ancient times to now, Nepali people are known for their unity and harmony.
At present, there are Khas-Aryan, Janajati, Newars, Madheshi, Muslims, Marwadi, Bengali, Punjabi etc.
They follow different religions.
They worship different deities, they celebrate different festivals but they live in communal harmony.
They are seen in each other’s celebrations.
We can find fine cooperation among Nepali people.
They are deeply connected both culturally and traditionally.
In my points view, the Nepali people have been able to live in communal harmony.
It is possible due to the long-term harmonious relationship between the Nepalese people.
Keep in mind
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Religion % of the Nepalese population: |
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Census 2021 |
Census 2011 |
Census 2001 |
Census 1971 |
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Hindu |
Hindu 81.3%, |
Hindu 80.62%, |
Hindu 89.4%, |
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Buddhist |
Buddhist 9.0% |
Buddhist 10.74% |
Buddhist 7.5% |
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Muslim |
Muslim 4.4% |
Muslim 4.20% |
Other 3.1% |
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Kiratist |
Kiratist 3.0% |
Kiratist 3.60% |
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Christian |
Christian 1.4% |
Christian 0.45% |
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Sikhs |
Sikhs 0.1% |
Other 0.40% |
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Jains |
Jains 0.1% |
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Other |
Other 0.7% |
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Concept of Service Costing
There are two types of business firms; goods selling firms or service providing or rendered firms.
Service costing is a type of operation costing which is used in service providing organizations.
In this service cost accounting, all the costs incurred in the production of a service are added together.
These costs are fixed costs, semi-variable costs and variable costs.
The sum of these costs is known as total cost.
The total cost is divided by the total units to find out per unit cost..
Service costing is followed by the service industries.
Generally there are two types of services.
They are internal services and external services.
Internal services
Services provided by sections and departments to the production department are called internal service.
External services
Services provided to public utility are called external service; they are:
Transport services
Supply services
Welfare services
Municipal services
Types of Services | Classification of Services
The service provided to public directly by undertaking is called service costing.
These services may be rendered by a company to the public or same for internal use of manufacturing.
There are different types of services; they are:
Transport services
bus, truck, taxi, auto rickshaws, cable car, tramways, trolley bus, railways, seaways, airways, steamer etc.
Supply service
Water, electricity (power house, boiler house), telephone/mobile/internet, gas etc
Welfare service
Hospital, nursing home, education institute (school, college, university), library, cinema, park, hospital, hotel, canteen etc.
Municipality service
Street light, road maintenance, sewage etc.
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2054, Q: 9
Nepal Yatayat Company gives you the following information:
|
Transactions |
Amount (Rs) |
|
Amount (Rs) |
|
Cost of bus with expected 100,000 km run |
|
Driver’s salary per month |
Rs 14,000 |
|
Annual registration and renewal charge |
Rs 12,000 |
Conductor’s salary per month |
Rs 8,000 |
|
Garage charge per month |
Rs 5,000 |
Diesel and oil per km |
Rs 14 |
|
Annual repairs |
Rs 24,000 |
|
|
The bus will run 25 days in a month with 40 passengers in 10 round trips of 20 km long route.
Required: (a) Operating cost sheet by showing standing charge and running charge separately; (b) Cost per passenger km
[Answer: (a) TOC (30,000 + 200,000) = Rs 230,000;
(b) CPPKm = Re 0.58; *Depn = Rs 60,000; Diesel = Rs 140,000]
SOLUTION:
Given and working note:
|
Total running km in a month |
Depreciation per month |
|
= 25 days × 10 trips × 2 ways × 20 km |
= (Rs 600,000 ÷ 100,000 km) × 10,000 km per month |
|
= 10,000 km |
= Rs 60,000 |
|
|
|
|
|
|
|
Total passenger km |
Diesel and oil per month |
|
= 10,000 km × 40 passengers |
= 10,000 km × Rs 14 |
|
= 400,000 |
= Rs 140,000 |
|
|
|
Operating Cost Sheet
Nepal Yatayat Company
(For 1 month)
|
Particulars |
Amount |
|
Standing/fixed charges: |
|
|
Registration and renewal charge (Rs 12,000 ÷ 12 months) |
1,000 |
|
Garage rent |
5,000 |
|
Repairs (Rs 24,000 ÷ 12 months) |
2,000 |
|
Driver’s salary |
14,000 |
|
Conductor’s salary |
8,000 |
|
Total A |
30,000 |
|
Running/variable charges: |
|
|
Depreciation |
60,000 |
|
Diesel and oil |
140,000 |
|
Total B |
200,000 |
|
Total operating cost (A+B) |
Rs 230,000 |
|
Total passenger km |
400,000 km |
|
Cost per passenger km = Total operating cost ÷ Total passenger km |
Re 0.58 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2055, Q: 15
National Transport Company gives you the following expenses:
Annual expenses:
|
Road license |
Rs 3,000 |
Insurance charge |
Rs 2,000 |
|
|
Garage rent |
Rs 24,000 |
Driver’s salary |
Rs 13,000 |
|
|
Other expenses |
Rs 23,000 |
|
|
|
|
|
||||
|
Additional information: |
||||
|
Cost of vehicle |
Rs 900,000 |
Estimated life |
300,000 km |
|
|
Estimated annual km |
20,000 km |
Cost of petrol per liter |
Rs 28 |
|
|
Kilometer mileage per liter |
10 km |
|
|
|
Required: Operating cost sheet showing annual total cost
[Answer: Total operating cost (65,000 + 116,000) = Rs 181,000]
SOLUTION:
Given and working note:
Depreciation per year
= (Rs 900,000 ÷ 300,000 km) × 20,000 km
= Rs 60,000
Petrol cost per year
= (20,000 km ÷ 10 km) × Rs 28
= Rs 56,000
Operating Cost Sheet
National Transport Company
(For 1 year)
|
Particulars |
Amount |
|
Standing/fixed charges: |
|
|
Road license |
3,000 |
|
Garage rent |
24,000 |
|
Other expenses |
23,000 |
|
Insurance charge |
2,000 |
|
Driver’s salary |
13,000 |
|
Total A |
65,000 |
|
Running/variable charges: |
|
|
Depreciation |
60,000 |
|
Petrol cost |
56,000 |
|
Total B |
116,000 |
|
Total operating cost (A+B) |
Rs 181,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2058, Q: 15
Scrutiny of the daily log book rendered by ABC Transport Company that owned a 40 setter fleet of 5 buses provided the following particulars:
Normal passengers traveled 90%
Annual depreciation registration and insurance per bus Rs 54,000
Fuel, lubricating oil, repair and maintenance etc per 25 km Rs 450
Drivers and helpers’ salary for 5 fleets per month Rs 37,500
Profit expected by the company is 20% on freight.
Each bus operated 4 round trips daily of 10 km distance each way for 25 days in a month.
Required: (a) Monthly standing charge; (b) Monthly operating charges; (c) Monthly profit;
(d) Freight to be charged per passenger km
[Answer: (a) Standing = Rs 60,000; (b) Running = Rs 180,000; Total = Rs 240,000;
(c) Monthly profit = Rs 60,000; (d) Freight per passenger/km = Re 0.83;
* Running km = 10,000; passenger km = 360,000;
* Fuel cost = Rs 180,000;
SOLUTION:
Given and working note:
|
Total running km in a month |
Depreciation per month |
|
|
= 5 buses × 25 days × 4 trips × 2 ways × 10 km |
= (Rs 54,000 ÷ 12 months) × 5 buses |
|
|
= 10,000 km |
= Rs 22,500 |
|
|
|
|
|
|
|
|
|
|
Total passenger km |
Diesel and oil per month |
|
|
= 10,000 km × 40 passengers × 90% |
For 25 km |
= Rs 450 |
|
= 360,000 p/km |
For 10,000 km |
= 450 × 10,000 ÷ 25 |
|
|
|
= Rs 180,000 |
|
|
|
|
Operating Cost Sheet
ABC Transport Company
(For 5 buses, one month)
|
Particulars |
Amount |
|
Standing/fixed charges: |
|
|
Depreciation |
22,500 |
|
Drivers and helpers’ salary |
37,500 |
|
Total A |
60,000 |
|
Running/variable charges: |
|
|
Fuel, lubricating oil etc |
180,000 |
|
Other expenses |
Nil |
|
Total B |
180,000 |
|
Total operating cost (A+B) |
Rs 240,000 |
|
Add: Profit (240,000 × 20/80) |
60,000 |
|
Total freight |
Rs 300,000 |
|
Freight per passenger per km = Total freight ÷ Total passenger km = (Rs 300,000 ÷ 360,000 p/km) |
Re 0.83 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2060/S Modified
Highway Cargo supplies the following information relating to a mini truck of 6 ton capacity that makes one trip daily covering distance of 30 km each way and carrying goods in full capacity on outward trip and on return only 20% of the capacity:
|
Capital cost of truck |
Rs 12,00,000 |
Yearly taxes and renewal |
Rs 10,800 |
|
Estimated life |
20 years |
Monthly wages of the driver |
Rs 12,000 |
|
Residual value at end of life |
Rs 200,000 |
Yearly insurance charges |
Rs 19,200 |
|
Repairs and maintenance cost per month |
Rs 4,000 |
Fixed general expenses yearly |
Rs 36,000 |
|
Monthly wages of the helper |
Rs 5,000 |
Fuel each or one way per trip |
Rs 440 |
In an average the truck run 26 days in a month
Required: (Operating cost sheet)
(1) Total tons km; (b) Fixed and variable cost and total cost; (c) Cost per month per ton km.
[Answers: Fixed = Rs 26,667; Variable = Rs 26,880; Total = Rs 53,547;
Cost per ton per km = Rs 9.53; *Depreciation = Rs 4,167]
SOLUTION
Given and working note:
Depreciation
= (Purchase value – Book salvage value) ÷ Life
= (12,00,000 – 2,00,000) ÷ 1/12
= Rs 4,167
Total tons km
|
Ton/km |
= (6 ton @ 100% × 30 km × 26 days) + (6 tone@ 20% × 30 km × 26 days) |
|
|
= 4,680 + 936 |
|
|
= 5,616 |
Operating Cost Sheet
A Highway Carriers
(for 1month)
|
Particulars |
Amount |
|
Standing/fixed charges: |
|
|
Wages to helper |
5,000 |
|
Taxes and renewal (Rs 10,800 ÷ 12 months) |
900 |
|
Wages to driver |
12,000 |
|
Insurance (Rs 19,200 ÷ 12 months) |
1,600 |
|
Fixed general expenses (Rs 36,000 ÷ 12 months) |
3,000 |
|
Depreciation |
4,167 |
|
Total A |
26,667 |
|
Running/variable charges: |
|
|
Fuel cost (Rs 440 per trip ×2 ways × 26 days) |
22,880 |
|
Repairs and maintenance |
4,000 |
|
Total B |
26,880 |
|
Total operating cost (A+B) |
Rs 53,547 |
|
Total ton-km |
5,616 |
|
Cost per ton per km = Total operating cost ÷ Total ton-km |
Rs 9.53 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2061/Second, Q: 8
A microbus operates 8 round trips each day for 30 days a month between 20 km apart newly urbanized two cities.
The bus has 15 passenger sitting capacity.
The average seat occupancy is 80%.
The monthly operating expenses are given below:
|
Driver and helper’s salary |
Rs 19,200 |
|
Repairs and maintenance expenses |
Rs 11,520 |
|
Route license, insurance and garage rent per month |
Rs 9,600 |
|
Cost of the micro bus expecting to run for 10 years |
Rs 20,73,600 |
|
Average all fuel cost per km |
Rs 16.50 |
Required: (Operating cost statement showing)
(a) Total km and passenger km; (2) Total cost reporting showing standing charges and running expenses
(c) Bus fare per passenger per km expecting 20% profit on cost
[Answer: Total km = 9,600; Total passenger km = 115,200;
Standing = Rs 46,080; Running = Rs 169,920; Total cost = Rs 216,000;
Profit = Rs 43,200; Bus fare per passenger per km = Rs 2.25;
*Depreciation = Rs 17,280;
SOLUTION
Total km
= 20 km × 8 trips × 2 ways × 30 days
= 9,600 km
Total passenger km
= 9,600 km × 15 passengers × 80%
= 115,200 km
Depreciation per month
= Rs 20,73,600 ÷ 10 years × 1/12 month
= Rs 17,280
Operating Cost Sheet
(For 1 month)
|
Particulars |
Amount |
|
Standing/fixed charges: |
|
|
Driver and helper’s salary |
19,200 |
|
Route license, insurance and garage rent |
9,600 |
|
Depreciation |
17,280 |
|
Total A |
46,080 |
|
Running/variable charges: |
|
|
Repairs and maintenance |
11,520 |
|
Average fuel cost (9,600 km × Rs 16.50) |
158,400 |
|
Total B |
169,920 |
|
Total monthly charges (A+B) |
216,000 |
|
Add: profit [20% on cost viz 216,000 @ 20%] |
43,200 |
|
Total revenue |
Rs 259,200 |
|
Total passenger km |
115,200 |
|
Bus fare per passenger per km = Total revenue ÷ Total passenger km |
Rs 2.25 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2063, Q: 7
ABC Transport Company which owned 10 buses supplied the following details:
|
Cost of each van |
Rs 24,00,000 |
|
Life of vans |
5 years |
|
Value of each van after 5 years |
Rs 6,00,000 |
|
Seating capacity of each van |
25 persons |
|
Normal passengers traveled of seating capacity |
80% |
|
Distance covered by each bus per day |
100 km |
|
Total running days per month |
26 days |
|
|
|
|
Operating costs for running 10 vans: |
|
|
|
Amount |
|
Salaries of office and supervision staffs per month |
65,000 |
|
Oils for one month |
1,60,000 |
|
Repairs and maintenance per month |
11,000 |
|
Taxation and insurance for one year |
1,20,000 |
|
Annual interest and other charges |
60,000 |
|
Rent of garage per month |
15,000 |
|
Wages of drivers, conductors and cleaners per month (Allocated on the basis of mileage run) |
1,20,000 |
Profit expected by the company is 25% on cost
Required: (Operating cost statement): (1) Total km and passenger km; (2) Monthly running charge, standing charge and total cost; (3) Monthly profit; (4) Fare to be charged per passenger per kilometer
[Answer: (1) Total km = 26,000; Passenger km = 520,000;
(2) Standing = Rs 395,000; running = Rs 291,000; Total = Rs 686,000;
(3) Profit = Rs 171,500 and (4) Charge per km = Rs 1.65;
* Depreciation = Rs 300,000]
SOLUTION
Total km
= 10 buses × 100 km per day × 26 days
= 26,000 km
Passenger km
= Total km × Normal Capacity
= 26,000 km × 25 persons@80%
= 520,000 km
Given and working note:
Depreciation
= (PV – BSV) ÷ Life
= (24,00,000 × 10 – 6,00,000 × 10) ÷ 5 years × 1/12
= 1,80,00,000 ÷ 5/12
= Rs 300,000
Operating Cost Sheet
ABC Transport Company
(For 10 vans, 1 month)
|
Particulars |
Amount Rs |
|
Standing/fixed charges: |
|
|
Salary of office and supervision staff per month |
65,000 |
|
Taxation and insurance (Rs 120,000 ÷ 12 months) |
10,000 |
|
Annual interest (Rs 60,000 ÷ 12 months) |
5,000 |
|
Rent for garage |
15,000 |
|
Depreciation |
300,000 |
|
Total A |
395,000 |
|
Running/variable charges: |
|
|
Oil for month |
160,000 |
|
Wages for driver, conductor and cleaner (mileage based) |
120,000 |
|
Repairs and maintenance |
11,000 |
|
Total B |
291,000 |
|
Total monthly charges (A+B) |
686,000 |
|
Add: Profit (25% on cost viz 686,000@ 25%) |
171,500 |
|
Total revenue |
Rs 857,500 |
|
Total passenger km |
520,000 km |
|
Fare per passenger per km = Total revenue ÷ Total passenger km |
Rs 1.65 |
######
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Click on the link for YouTube videos |
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Accounting Equation |
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Journal Entries in Nepali |
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Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cashbook |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Click on the link for YouTube videos chapter wise |
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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######
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2065 Modified
ABC Transport Company supplies the following information relating to a microbus with the capacity of carrying 20 passengers. It makes 5 round trips daily covering distance of 5 km. It carries the passenger with 80% capacity for 25 days in a month. Other relevant information is:
|
Particulars |
Amount in Rs |
Particulars |
Amount in Rs |
|
Cost of microbus |
15,00,000 |
Taxes and renewal charge |
12,000 per year |
|
Estimated life |
10 years |
Insurance charge |
18,000 per year |
|
Residual value at the end of life |
5,00,000 |
General fixed expenses |
20,000 per year |
|
Repairs and maintenance cost |
5,000 per month |
Fuel each way for 5 km |
Rs 100 |
|
Salary and wages of helper |
15,000 per month |
|
|
Required: (Operating cost statement):
(1) Total km and passenger km; (2) Standing charge, running charge and total cost; (3) Cost per passenger km
[Answer: Total km = 1,250; passenger km = 20,000;
(2) Standing = Rs 27,500; Running = Rs 30,000; Total = Rs 57,500;
(3) Cost per passenger km = Rs 2.88; *Depn = Rs 8,333; *Fuel = Rs 25,000;
SOLUTION
Given and working note:
|
Total km |
Depreciation |
|
|
= 1 bus × 5 trips × 2 ways × 5 km × 25 days |
= (PV – BSV) ÷ Life × 1/12 |
|
|
= 1,250 km |
= (15,00,000 – 5,00,000) ÷ 10 years × 1/12 |
|
|
|
= Rs 8,333 |
|
|
|
|
|
|
|
|
|
|
Passenger km |
Fuel charge |
|
|
= Total km × Normal Capacity |
For 5 km |
= Rs 100 |
|
= 1,250 km × 20 persons@80% |
For 1,250 km |
= Rs 100 × 1250 km ÷ 5 km |
|
= 20,000 km |
|
= Rs 25,000 |
Operating Cost Sheet
ABC Transport Company
(For 1 month)
|
Particulars |
Amount Rs |
|
Standing/fixed charges: |
|
|
Depreciation |
8,333 |
|
Salary and wages of helpers |
15,000 |
|
Taxation and renewal charge [Rs 12,000 ÷ 12 month] |
1,000 |
|
Insurance charge [Rs 18,000 ÷ 12 month] |
1,500 |
|
General fixed expenses [Rs 20,000 ÷ 12 month] |
1,667 |
|
Total A |
27,500 |
|
Running/variable charges: |
|
|
Repairs and maintenance |
5,000 |
|
Fuel [Rs 100 × 5 tips × 2 ways × 25 days] |
25,000 |
|
Total B |
30,000 |
|
Total cost (A+B) |
Rs 57,500 |
|
Total passenger km |
20,000 km |
|
Fare per passenger per km = Total cost ÷ Total passenger km |
Rs 2.88 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2067, Q: 7
Mr Shrestha has provided the following Particulars of his tourist car:
Cost of car Rs 5,50,000 (life 10 years and scrap value Rs 50,000)
Distance of route 40 km one way.
Insurance and taxes Rs 10,500 p.a.
Garage rent Rs 2,000 p.m.
Repair and maintenance Rs 12,000 p.a.
Driver’s salary Rs 6,000 p.m.
Other overhead charges Rs 500 p.m.
Petrol cost Rs 100 per 10 km
Car will make 4 round trips each day.
Car will operate 25 days in a month.
Profit is to be charged @ 15% on freight.
Required: (Operating cost sheet): (a) Calculation for depreciation, running km and fuel; (b) Showing proper division of cost;
(c) Profit; (d) Charge per passenger km
[Answer: (a) Depn = Rs 4,167; Running km = 8,000; Fuel cost = Rs 80,000;
(b) Standing = Rs 13,042; Running = Rs 81,500; Total = Rs 94,542;
(c) Profit = Rs 16,684; (d) Charge per km = Rs 13.90]
SOLUTION
Given and working note:
|
Depreciation per month |
|
|
= (PV – BSV) ÷ Life × 1/12 |
|
|
= (Rs 550,000 – Rs 50,000) ÷ 10 years × 1/12 |
|
|
= Rs 4,167 |
|
|
|
|
|
Running km |
|
|
= 1 car × 40 km × 4 trips × 2 ways × 25 days |
|
|
= 8,000 km |
|
|
|
|
|
Petrol per month |
|
|
10 km needs |
= Rs 100 |
|
8,000 km needs |
= 100 × 8,000 ÷ 10 |
|
|
= Rs 80,000 |
|
|
|
Operating Cost Sheet
Of Mr Shrestha
(For one month)
|
Particulars . |
Amount Rs |
|
Standing/fixed cost: |
|
|
Insurance and tax [Rs 10,500 ÷ 12 month] |
875 |
|
Garage rent |
2,000 |
|
Driver’s salary |
6,000 |
|
Depreciation |
4,167 |
|
Total [A] |
13,042 |
|
Running/variable cost: |
|
|
Repairs and maintenance [Rs 12,000 ÷ 12 month] |
1,000 |
|
Other charges |
500 |
|
Petrol |
80,000 |
|
Total [B] |
81,500 |
|
Total cost [A+B] |
Rs 94,542 |
|
Add: Profit [Rs 94,542 × 15/85] |
16,684 |
|
Net cost |
Rs 111,226 |
|
Running km |
8,000 km |
|
Cost per passenger km = Rs 111,226 ÷ 8,000 km |
Rs 13.90 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2068, Q: 7
A Local Transport Company operates 8 mini buses between Ratnapark to Swoyambhu vis Kalimati (Kathmandu) which covered approximately 15 km.
The seating capacity of each mini bus is 30 passengers.
The following information was obtained from the company’s log book for the current month:
Cost of each mini bus Rs 20,00,000
Estimated life 8 years
Scrap value per mini bus Rs 80,000
Diesel, oil, grease Rs 125 per trip each way
Each mini bus is operated by 3 crew member from 6 am to 8 pm each day for the average 30 days in a month.
Wages and salary of operating crew per mini bus per month Rs 12,000
Repair and maintenance per month per bus Rs 2,000
Insurance per bus per month Rs 1,200
Depreciation per month per bus Rs 20,000
Interest and office charge per bus per month Rs 17,000
The passengers’ occupancy was 100% in each trip.
All the buses run all the days in the month making 6 round trips per day.
Required: Cost statement by showing cost per passenger per km
[Answer: (a) TC (Rs 401,600 + 376,000) = Rs 777,600;
(b) Passenger km = 12,96,000; (c) Cost per passenger per km = Re 0.60;
*Depn = Rs 160,000; Diesel = Rs 360,000]
SOLUTION:
Given and working note:
|
No. of trips |
Depreciation for 8 buses per month |
|
= 8 buses × 6 trips × 2 ways × 30 days |
= Rs 20,000 × 8 buses |
|
= 2,880 |
= Rs 160,000 |
|
|
|
|
|
|
|
Diesel, oil, grease |
Running km |
|
= 2,880 trips × Rs 125 |
= 8 buses × 15 km × 6 trips × 2 ways × 30 days |
|
= Rs 360,000 |
= 43,200 km |
|
|
|
|
|
|
|
Depreciation per bus per month |
Passenger km |
|
= (PV – BSV) ÷ Life × 1/12 |
= 43,200 km × 30 passengers |
|
= (Rs 20,00,000 – Rs 80,000) ÷ 8 years × 1/12 month |
= 12,96,000 km |
|
= Rs 20,000 (given in question also) |
|
|
|
|
Operating Cost Sheet
A Local Transport Company
(For 8 buses for one month)
|
Particulars . |
Amount Rs |
|
Standing/fixed cost: |
|
|
Wages and salary (Rs 12,000 × 8) |
96,000 |
|
Insurance (Rs 1,200 × 8) |
9,600 |
|
Interest and office charges (Rs 17,000 × 8) |
136,000 |
|
Depreciation |
160,000 |
|
Total [A] |
401,600 |
|
Running/variable cost: |
|
|
Repairs and maintenance [Rs 2,000 × 8] |
16,000 |
|
Diesel, oil, grease |
360,000 |
|
Total [B] |
376,000 |
|
Total cost [A+B] |
Rs 777,600 |
|
Passenger km |
12,96,000 km |
|
Cost per passenger km = Rs 777,600 ÷ 12,96,000 km |
Re 0.60 |
#####
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Accounting for Share |
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Share in Nepali |
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Debentures |
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Final Accounts: Class 12 |
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Final Accounts in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2069, Q: 7
A taxi owner supplies the following particulars in respect of a taxi car:
Cost of taxi car Rs 800,000
Driver’s salary per month Rs 5,000
Rent of garage per month Rs 2,000
Insurance premium per year Rs 12,000
Road tax and repairs per year Rs 33,600
The life of a taxi is 200,000 km; at the end, it is estimated to be sold at Rs 200,000.
The taxi runs an average of 6,000 km per month of which 25% runs in empty.
Petrol consumption is 15 km per liter; the cost of petrol is Rs 100 per liter.
Mobil and other sundry expenses amount to Rs 20 per 100 km.
Required: (a) Operating cost statement by showing standing and running charges; (b) Effective cost of running taxi per km
[Answer: (a) Total cost (10,800 + 59,200) = Rs 70,000;
(b) Cost per passenger km = Rs 15.56; *Effective km = 4,500 km;
*Depn = Rs 18,000; Petrol = Rs 40,000; Mobil = Rs 1,200;
SOLUTION:
Given and working note:
|
Effective running km |
Petrol expenses |
||
|
Here, 25% empty means 75% capacity |
15 km needs |
= 1 liter |
|
|
= 6,000 km @ 75% |
6,000 km need |
= 1 × 6,000 ÷ 15 km |
|
|
= 4,500 km |
|
= 400 liters |
|
|
|
Now, |
||
|
|
= 400 liters × Rs 100 |
||
|
Depreciation per month |
= Rs 40,000 |
||
|
= (PV – BSV) ÷ Life × 6,000 km |
|
||
|
= (Rs 800,000 – Rs 200,000) ÷ 200,000 km × 6,000 km |
|
||
|
= Rs 18,000 |
Mobil expenses |
||
|
|
For 100 km |
= Rs 20 |
|
|
|
For 6,000 km |
= Rs 20 × 6,000 ÷ 100 |
|
|
|
|
= Rs 1,200 |
|
|
|
|
||
Operating Cost Sheet
Of A Taxi Owner
(For one month)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Driver’s salary |
5,000 |
|
Rent |
2,000 |
|
Insurance (Rs 12,000 ÷ 12 months) |
1,000 |
|
Road tax and repairs (Rs 33,600 ÷ 12 months) |
2,800 |
|
Total [A] |
10,800 |
|
Running/variable cost: |
|
|
Depreciation |
18,000 |
|
Petrol expenses |
40,000 |
|
Mobil expenses |
1,200 |
|
Total [B] |
59,200 |
|
Total cost [A+B] |
Rs 70,000 |
|
Effective running km |
4,500 km |
|
Cost per passenger km = Rs 70,000 ÷ 4,500 km |
Rs 15.56 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2071, Q: 7
A Transport Company supplies you the following information for the current month:
Cost of truck Rs 24,00,000
Salary and wages Rs 18,000
Diesel per km Rs 10
Garage rent per month Rs 2,000
Kilometer runs in a month 10,000 km
Repair and maintenance per month Rs 6,000
Insurance per year Rs 48,000
Depreciation 10% per annum
Required: (a) Statement of total cost by showing standing and running charges; (b) Cost per km run
[Answer: (a) TC = (44,000 + 106,000) = Rs 150,000; (b) Rs 15;
*Depreciation = Rs 20,000
SOLUTION:
Given and working note:
Depreciation per month
= Rs 24,00,000 × 10% × 1/12 month
= Rs 20,000
Operating Cost Sheet
Of A Transport Company
(For one month)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Salary and wages |
18,000 |
|
Garage rent |
2,000 |
|
Insurance (Rs 48,000 ÷ 12 months) |
4,000 |
|
Depreciation |
20,000 |
|
Total [A] |
44,000 |
|
Running/variable cost: |
|
|
Repair and maintenance |
6,000 |
|
Diesel expenses (10,000 km × Rs 10) |
100,000 |
|
Total [B] |
106,000 |
|
Total cost [A+B] |
Rs 150,000 |
|
Effective running km |
10,000 km |
|
Cost per passenger km = Rs 106,000 ÷ 10,000 km |
Rs 15 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2072, Q: 14a
A Transport Company supplies you the following information for the month of January:
|
Cost of car |
Rs 20,00,000 |
|
Kilometer runs in January |
12,000 km |
|
Salary and wages |
Rs 40,000 |
|
Diesel and lubricant per km |
Rs 5 |
|
Repairs |
Rs 7,000 |
|
Garage rent |
Rs 10,000 |
|
Insurance and road tax per annum |
Rs 96,000 |
|
Depreciation per year under SLM |
15% |
Required: (a) Total cost showing standing and running changes; (b) Profit if the company charges 20% profit on the cost
[Answer: (a) TC (83,000 + 67,000) = Rs 150,000; (b) Profit = Rs 30,000;
*Depreciation = Rs 25,000]
SOLUTION:
Given and working note:
Depreciation per month
= Rs 20,00,000 × 15% × 1/12 month
= Rs 25,000
Operating Cost Sheet
Of A Transport Company
(For one month)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Salary and wages |
40,000 |
|
Garage rent |
10,000 |
|
Insurance (Rs 96,000 ÷ 12 months) |
8,000 |
|
Depreciation |
25,000 |
|
Total [A] |
83,000 |
|
Running/variable cost: |
|
|
Repair and maintenance |
7,000 |
|
Diesel and lubricant (12,000 km × Rs 5) |
60,000 |
|
Total [B] |
67,000 |
|
Total cost [A+B] |
Rs 150,000 |
|
Add: Profit (150,000 × 20%) |
30,000 |
|
Total fare |
Rs 150,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2073, Q: 14a
Suman Transport owns a truck with 10 ton capacity which carries goods between two cities having distance of 50 km.
The truck carries with full load operates one round trip each day for 20 days in a month. Other details are:
|
Cost of truck |
Rs 30,00,000 |
|
Life |
10 years |
|
Scrap value after 10 years |
Rs 6,00,000 |
|
Driver’s wages |
Rs 15,000 per month |
|
Cleaner’s wage |
Rs 2,500 per month |
|
Diesel, mobil oil, grease etc |
Rs 20 per km |
|
Garage rent |
Rs 5,000 per month |
|
Insurance and road tax |
Rs 6,000 per annum |
|
Repairs |
Rs 4,000 per month |
Required: (a) Cost per ton km by showing standing and running charges; (b) Fare to be charge per ton km if 25% profit on fare
[Answer: (a) TC (43,000 + 44,000) = Rs 87,000; (b) Fare to be charged = Rs 5.80;
*Profit per ton km = Rs 1.45; Depn = Rs 20,000; ton km (2,000 × 10) = 20,000
SOLUTION:
Given and working note:
Total running km
= 1 truck × 20 days × 1 trip × 2 ways × 50 km
= 2,000 km
Total ton km
= 2,000 ton/km × 10 ton
= 20,000 ton km
Depreciation
= (Rs 30,00,000 PV – Rs 6,00,000 Scrap) ÷ 10 years ÷ 1/12 month
= 240,000 ÷ 1/12 month
= Rs 20,000
Operating Cost Sheet
Of Suman Transport Company
(For one month)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Driver’s wages |
15,000 |
|
Cleaner’s wages |
2,500 |
|
Garage rent |
5,000 |
|
Insurance (Rs 6,000 ÷ 12 months) |
500 |
|
Depreciation |
20,000 |
|
Total [A] |
43,000 |
|
Running/variable cost: |
|
|
Repair and maintenance |
4,000 |
|
Diesel and lubricant (2,000 km × Rs 20) |
40,000 |
|
Total [B] |
44,000 |
|
Total cost [A+B] |
Rs 87,000 |
|
Cost per ton km (Rs 87,000 ÷ 20,000 ton km) |
Rs 4.35 |
|
Add: Profit (Rs 4.35 × 25/75) |
Rs 1.45 |
|
Fare to be charged |
Rs 5.80 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2075, Q: 15a
A Transport Company provides the following particulars:
|
Particulars |
|
|
Cost of vehicle |
Rs 40,00,000 |
|
Estimated life |
10 years |
|
Estimated scrap value at the end of 10 years life |
Rs 5,00,000 |
|
The vehicle covers in a year |
20,000 km |
|
|
|
|
Other annual expenses are: |
|
|
Garage rent |
Rs 15,000 |
|
Road license |
Rs 20,000 |
|
Insurance charge |
Rs 25,000 |
|
Driver’s salary |
Rs 60,000 |
|
Other fixed expenses |
Rs 20,000 |
|
Fuel consumption |
10 km per liter |
|
Cost of fuel per liter |
Rs 90 |
Required: Operating cost sheet by showing standing and running charges
[Answer: TC (250,000 + 180,000) = Rs 670,000;
Depn = Rs 350,000; Fuel = Rs 180,000]
SOLUTION:
Given and working note:
|
Depreciation |
Fuel cost |
|
|
= (40,00,000 PV – 500,000 Scrap) ÷ 10 years |
10 km requires |
= Rs 90 |
|
= 35,00,000 ÷ 10 years |
20,000 km requires |
= Rs 90 × 20,000 km ÷ 10 km |
|
= Rs 350,000 |
|
= Rs 180,000 |
Operating Cost Sheet
Of A Transport Company
(For one year)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Garage rent |
15,000 |
|
Road license |
20,000 |
|
Insurance charge |
25,000 |
|
Driver’s salary |
60,000 |
|
Other fixed expenses |
20,000 |
|
Depreciation |
350,000 |
|
Total [A] |
490,000 |
|
Running/variable cost: |
|
|
Fuel expenses |
180,000 |
|
Total [B] |
180,000 |
|
Total cost [A+B] |
Rs 670,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2077, Q: 14a
Harati Yatayat Sewa presents the following information to you:
|
Particulars |
|
|
Cost of bus |
Rs 660,000 |
|
Estimated scrap value at the end of 10 years life |
Rs 60,000 |
|
|
|
|
Other expenses are: |
|
|
Driver’s salary |
Rs 20,000 per month |
|
Helper’s salary |
Rs 10,000 per month |
|
Insurance and tax |
Rs 36,000 per month |
|
Other administrative expenses |
Rs 24,000 per month |
|
Diesel and lubricating cost |
Rs 20 per km |
|
Profit |
10% on freight |
The bus will run 25 days in a month with 6 round trips of 15 km a day.
Required: Operating cost sheet by showing standing and running charges
[Answer: TC (95,000 + 90,000) = Rs 185,000;
Depn = Rs 5,000; Diesel = Rs 90,000]
SOLUTION:
Given and working note:
|
Depreciation per year |
Total running km |
|
= (660,000 PV – 60,000 Scrap) ÷ 10 years |
= 1 bus × 25 days × 6 trip × 2 ways × 15 km |
|
= 600,000 ÷ 10 years |
= 4,500 km |
|
= Rs 60,000 |
|
|
|
|
|
Depreciation per month |
Diesel and lubricating cost |
|
= Rs 60,000 × 1/12 |
= 4,500 km × Rs 20 |
|
= Rs 5,000 |
= Rs 90,000 |
|
|
|
Operating Cost Sheet
Harati Yatayat Sewa
(For one month)
|
Particulars . |
Amount |
|
Standing/fixed cost: |
|
|
Driver’s salary |
20,000 |
|
Helper’s salary |
10,000 |
|
Insurance and tax |
36,000 |
|
Other administrative expenses |
24,000 |
|
Depreciation |
5,000 |
|
Total [A] |
95,000 |
|
Running/variable cost: |
|
|
Diesel and lubricating cost |
90,000 |
|
Total [B] |
90,000 |
|
Total cost [A+B] |
Rs 185,000 |
|
Cost per km (Rs 185,000 ÷ 4,500 km) |
Rs 41.11 |
|
Add: Profit (Rs 41.11× 10/90) |
Rs 4.57 |
|
Fare to be charged |
Rs 45.68 |
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Activity Based Costing | TU Solution | Traditional Costing | Total Cost | Cost Per Unit
Activity Based Costing, TU Solution contents numerical problems and solution with clear working notes.
Manufacturing company prepares cost statement as per traditional costing system and activity based costing.
Direct materials and direct labour are recorded for prime cost.
There are two methods to calculate cost per unit.
Machine hour rate or labour hour rate is used for traditional costing system.
Cost tools are used to find out cost driver rate.
Overheads are calculated on the basis of cost driver rate in activity based costing.
Traditional Costing System | Conventional Costing
[Conventional costing system, absorption costing system, volume based costing system]
The tradition costing system was designed decades ago for costing.
There are two types of distribution under traditional costing system.
They are primary and secondary distribution of overhead.
Under primary costing, direct materials, direct labour and direct overhead are calculated.
Under secondary costing, labour hour based or machine hour based overhead are calculated.
Activity Based Costing | Concept of ABC
Direct materials and direct labour are the major elements of traditional cost accounting system.
The traditional system is suitable for those companies who produce goods in narrow range.
If company produces wide range of goods, overhead cost will be relatively higher to the direct cost.
And it may be difficult to allocation (share) fixed cost.
Activity based cost (ABC) was introduced by Robin Cooper in 1980 to resolves the difficulties of assigning overhead amount under traditional costing.
Then Robert S. Kaplan recommended it in 1988; it is recommended for:
· A wide range of products
· Product costing and profitability
· Distribution and controlling overheads appropriately (properly)
ABC helps to better understanding about overhead cost.
It helps to allocation overheads in systematic and scientific way.
Activities are transaction, events, tasks or unit of work for producing goods.
ABC is also called transaction based costing.
Cost driver | Cost indicator | Cost pools
|
SN |
Activities or Transactions |
Cost Drivers |
|
1. |
Material procurement, Order execution |
No. of order |
|
2. |
Material handling |
No. of order executed, No. of movement |
|
3. |
Store |
No. of batch, Requisition raised |
|
4. |
Materials handling and dispatch |
Order executed, No. materials component, volume |
|
5. |
Dispatch of goods |
No. of dispatches |
|
6. |
Schedule cost, set up cost |
Production runs |
|
7. |
Materials inspections |
No. of inspections |
|
8 |
Repair and maintenance, short term variable cost |
Machine hours |
|
9. |
Power |
Horse power |
|
10. |
Production scheduling |
No. of production scheduling |
|
11. |
Engineering cost |
No. of set up, No. of product change, No. of tool change |
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2054, Q: 16
A Manufacturing Company manufactures three products A, B and C. The details regarding product and cost are summarized in the following table:
|
Products |
Output units |
Direct labour |
Machine |
Materials cost |
Production run |
|
|
|
Hour/unit |
Hour/unit |
Per unit |
Per product |
|
A |
2,000 |
2.5 |
2 |
Rs 10 |
10 |
|
B |
5,000 |
4.0 |
2 |
Rs 12 |
15 |
|
C |
10,000 |
5.0 |
2 |
Rs 15 |
20 |
Further information:
|
(i) Direct labour cost per hour is Rs 4 |
||
|
(ii) Overhead cost and cost driver: |
||
|
|
Amount |
Cost driver |
|
Repair and maintenance |
Rs 102,000 |
Machine hours |
|
Set up cost |
Rs 90,000 |
Production runs |
|
Scheduling cost |
Rs 45,000 |
Production runs |
|
Indirect labour |
Rs 138,000 |
DLH |
|
Total |
Rs 375,000 |
|
Required: (a) Cost per unit under traditional costing system by using direct labour
(b) Cost absorption statement under ABC system
(a) Total cost: A = Rs 65,000; B = Rs 240,000; C = Rs 600,000;
CPU: A = Rs 32.50; B = Rs 48; C = Rs 60;
(b) Total cost: A = Rs 91,000; B = Rs 251,000; C = Rs 562,000;
CPU: A = Rs 45.60; B = Rs 50.36; C = Rs 56.20;
*CDR = Rs 3; Rs 2,000; Rs 1,000; Rs 1.84]
SOLUTION
Given and working note:
|
Direct labour hour = Output × DLHPU |
Direct labour hour rate |
||
|
A |
= 2,000 units × 2.5 hours |
= 5,000 hours |
= Total overhead ÷ Direct labour hour |
|
B |
= 5,000 units × 4 hours |
= 20,000 hours |
= Rs 375,000 ÷ 75,000 hours |
|
C |
= 10,000 units × 5 hours |
= 50,000 hours |
= Rs 5 |
|
Total |
= 75,000 hours |
|
|
Statement of Cost under Traditional Costing System
|
Particulars |
Products |
||
|
|
A = 2,000 |
B = 5,000 |
C = 10,000 |
|
Materials [Output × MCPU] |
20,000 |
60,000 |
150,000 |
|
Labour [Output × DLHPU × Rs 4] |
20,000 |
80,000 |
200,000 |
|
Prime cost |
40,000 |
140,000 |
350,000 |
|
Add: Overhead based on LH (DLH × LH Rate) |
25,000 |
100,000 |
250,000 |
|
Total cost |
Rs 65,000 |
Rs 240,000 |
Rs 600,000 |
|
Output |
2,000 |
5,000 |
10,000 |
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 32.50 |
Rs 48.00 |
Rs 60.00 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Repair and maintenance |
102,000 |
Machine hours |
34,000 |
3 |
|
Set up cost |
90,000 |
Production runs |
45 |
2,000 |
|
Scheduling cost |
45,000 |
Production runs |
45 |
1,000 |
|
Indirect labour |
138,000 |
DLH |
75,000 |
1.84 |
Given and working note for cost driver:
|
Production runs |
Machine hours = Output × MHPU |
||||
|
A |
|
= 10 |
A |
= 2,000 units × 2 h |
= 4,000 |
|
B |
|
= 15 |
B |
= 5,000 units × 2 h |
= 10,000 |
|
C |
|
= 20 |
C |
= 10,000 units × 2 h |
= 20,000 |
|
Total |
= 45 |
Total |
= 34,000 |
||
|
|
|||||
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
A = 2,000 |
B = 5,000 |
C = 10,000 |
|
|
Materials [Output × MCPU] |
20,000 |
60,000 |
150,000 |
|
|
Labour [Output × DLHPU × Rs 4] |
20,000 |
80,000 |
200,000 |
|
|
Prime cost |
40,000 |
140,000 |
350,000 |
|
|
Add: Overheads: (based on ABC) |
|
|
|
|
|
Repair and maintenance |
[Machine hours × Rs 3] |
12,000 |
30,000 |
60,000 |
|
Set up cost |
[Production runs × Rs 2,000] |
20,000 |
30,000 |
40,000 |
|
Scheduling cost |
[Production runs × Rs 1,000] |
10,000 |
15,000 |
20,000 |
|
Indirect labour |
[DLH × Rs 1.84] |
9,200 |
36,800 |
92,0020 |
|
Total cost |
Rs 91,000 |
Rs 251,000 |
Rs 562,000 |
|
|
Output |
2,000 |
5,000 |
10,000 |
|
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 45.60 |
Rs 50.36 |
Rs 56.20 |
|
######
|
Click on the link for YouTube videos |
|
|
Accounting Equation |
|
|
Journal Entries in Nepali |
|
|
Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cashbook |
|
|
Trial Balance and Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
|
|
|
Click on the link for YouTube videos chapter wise |
|
|
Financial Accounting and Analysis (All videos) |
|
|
Accounting Process |
|
|
Accounting for Long Lived Assets |
|
|
Analysis of Financial Statement |
|
######
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2057, Q: 16
A Manufacturing Company manufactures three products X, Y and Z by using the same plant and process. The following information related to a particulars period:
|
Products |
Output units |
Materials |
Direct labour |
Machine hour |
Production run |
|
|
|
cost per unit |
cost per unit |
per unit |
Per product |
|
X |
100 |
Rs 100 |
Rs 6 |
2 hours |
4 |
|
Y |
200 |
Rs 50 |
Rs 3 |
1 hour |
8 |
|
Z |
500 |
Rs 40 |
Rs 5 |
1.2 hours |
20 |
The production overhead cost and cost driver:
|
Overheads |
Amount (Rs) |
Cost driver |
|
Set up cost |
64,000 |
No. of production runs |
|
Store receiving |
8,000 |
Requisition raised |
|
Inspection and control |
16,000 |
No. of production runs |
|
Material handling and dispatch |
16,000 |
Order executed |
|
Total |
Rs 104,000 |
|
Additional information:
(i) Three products were produced in a production run of 25 units each
(ii) The requisition raised for the period in the stores for product X, Y and Z were 10, 10 and 20 respectively
(iii) The number of order being in a batch of 20 units for each product and number of total order executed was 40
Required: Statement of total cost and cost per unit for each product by using:
(a) Conventional absorption costing on the basis machine hours; (b) An activity based costing by using suitable cost drivers
[Answer: (a) Total cost: X = Rs 31,400; Y = Rs 31,400; Z = Rs 84,900;
CPU: X = Rs 314; Y = Rs 157; Z = Rs 169.80;
(b) Total cost: X = Rs 24,600; Y = Rs 36,600; Z = Rs 86,500;
CPU: X = Rs 246; Y = Rs 183; Z = Rs 173;
*CDR = Rs 2,000; Rs 200; Rs 500; Rs 400]
SOLUTION
Given and working note:
|
Machine hours = Output × MHPU |
Machine hour rate (MHR) |
||
|
X |
= 100 units × 2 hours |
= 200 hours |
= Total overhead ÷ Machine hours |
|
Y |
= 200 units × 1 hour |
= 200 hours |
= Rs 104,000 ÷ 1,000 hours |
|
Z |
= 500 units × 1.2 hours |
= 600 hours |
= Rs 104 |
|
Total |
= 1,000 hours |
|
|
Statement of Cost under Traditional Costing System
|
Particulars |
Products |
||
|
|
X = 100 |
Y = 200 |
Z = 500 |
|
Materials [Output × MCPU] |
10,000 |
10,000 |
20,000 |
|
Labour [Output × DLHPU] |
600 |
600 |
2,500 |
|
Prime cost |
10,600 |
10,600 |
22,500 |
|
Add: Overhead based on MH (MH × MHR) |
20,800 |
20,800 |
62,400 |
|
Total cost |
Rs 31,400 |
Rs 31,400 |
Rs 84,900 |
|
Output |
100 |
200 |
500 |
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 314.00 |
Rs 157.00 |
Rs 169.80 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Set up cost |
64,000 |
No. of production runs |
32 |
2,000 |
|
Store receiving |
8,000 |
Requisition raised |
40 |
200 |
|
Inspection and control |
16,000 |
No. of production runs |
32 |
500 |
|
Material handling and dispatch |
16,000 |
Order executed |
40 |
400 |
Given and working note for cost driver:
|
Production runs |
Requisition raised |
No. of order executed = Output ÷ 20 |
|
|
= X + Y + Z |
= X + Y + Z |
X = 100 ÷ 20 |
= 5 |
|
= 4 + 8 + 20 |
= 10 + 10 + 20 |
Y = 200 ÷ 20 |
= 10 |
|
= 32 |
= 40 |
Z = 500 ÷ 20 |
= 25 |
|
|
|
Total |
= 40 |
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
X = 100 |
Y = 200 |
Z = 500 |
|
|
Materials [Output × MCPU] |
10,000 |
10,000 |
20,000 |
|
|
Labour [Output × MHPU] |
600 |
600 |
2,500 |
|
|
Prime cost |
10,600 |
10,600 |
22,500 |
|
|
Add: Overheads: (based on ABC) |
|
|
|
|
|
Set up cost |
[Production runs × Rs 2,000] |
8,000 |
16,000 |
40,000 |
|
Store receiving |
[Requisition raised × Rs 200] |
2,000 |
2,000 |
4,000 |
|
Inspection and control |
[Production runs × Rs 500] |
2,000 |
4,000 |
10,000 |
|
Material H&D |
[Order executed × Rs 400] |
2,000 |
4,000 |
10,000 |
|
Total cost |
Rs 24,600 |
Rs 36,600 |
Rs 86,500 |
|
|
Output |
100 |
200 |
500 |
|
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 246 |
Rs 183 |
Rs 173 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2060/First, Q: 16
Three products A, B and C are produced by A Manufacturing Concern. The details of the particular are noted in the table:
|
Materials |
Output units |
DLH |
Machine hours |
Raw materials cost |
Raw materials usage |
|
|
|
per unit |
per unit |
per kg (Rs) |
per unit |
|
A |
5,000 |
1.0 |
4/5 |
2 |
1.5 |
|
B |
7,000 |
2.0 |
1.5 |
3 |
2.0 |
|
C |
8,000 |
2.5 |
2.0 |
5 |
2.5 |
Other details are:
(i) Direct labour cost per hour is Rs 6
(ii) 1,000 units batch of production run is effective in each product.
(iii) Raw materials purchase consists of 500 kg in each purchase.
Actual overhead incurred are:
|
Overhead |
Amount (Rs ) |
Cost tools |
|
|
Production scheduling cost |
30,000 |
Production run |
|
|
Maintenance expenses |
15,250 |
Machine hours |
|
|
Indirect labour |
62,400 |
DLH |
|
|
Set up costs |
28,430 |
Production run |
|
|
Order execution cost |
19,920 |
Order executed |
|
|
|
156,000 |
|
|
Required: (1) Traditional cost statement by using DLH for overhead to determine total cost and cost per unit
(2) ABC Statement showing total cost and cost per unit for each product, allocating cost by using cost drives
[Answer: (1) TC = Rs 65,000; Rs 182,000; Rs 300,000; CPU = Rs 13; Rs 26; Rs 37.50;
(2) TC = Rs 74,588; Rs 181,073; Rs 291,340; CPU = Rs 14.92; Rs 25.87; Rs 36.42;
*CDR = 1,500; 0.50; 1.60; 1,421.50; 498; other executed = Output ÷ 500 kg]
*Materials usage is applied for direct materials only]
SOLUTION
Given and working note:
|
Direct labour hour = Output × DLHPU |
Direct labour hour rate |
||
|
A |
= 5,000 units × 1 hours |
= 5,000 hours |
= Total overhead (given) ÷ Direct labour hour |
|
B |
= 7,000 units × 2 hours |
= 14,000 hours |
= Rs 156,000 ÷ 39,000 hours |
|
C |
= 8,000 units × 2.5 hours |
= 20,000 hours |
= Rs 4 |
|
Total |
= 39,000 hours |
|
|
Statement of Cost under Traditional Costing System
|
Particulars |
Products |
||
|
|
A = 5,000 |
B = 7,000 |
C = 8,000 |
|
Materials [Output × Usage @ MCPU] |
15,000 |
42,000 |
100,000 |
|
Labour [Output × DLHPU @ Rs 6] |
30,000 |
84,000 |
120,000 |
|
Prime cost |
45,000 |
126,000 |
220,000 |
|
Add: Overhead based on LH (DLH × LH Rate) |
20,000 |
56,000 |
80,000 |
|
Total cost |
Rs 65,000 |
Rs 182,000 |
Rs 300,000 |
|
Output |
5,000 |
7,000 |
8,000 |
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 13.00 |
Rs 26.00 |
Rs 37.50 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Production schedule cost |
30,000 |
Production runs |
20 |
1,500.00 |
|
Maintenance expenses |
15,250 |
Machine hour |
30,500 |
0.50 |
|
Indirect labour |
62,400 |
Direct labour hour |
39,000* |
1.60 |
|
Set up |
28,430 |
Production runs |
20 |
1,421.50 |
|
Other execution |
19,920 |
Other execution |
40 |
498.00 |
Given and working note for cost driver:
|
Production runs = Output ÷ 1,000 units |
Machine hours = Output × MHPU |
||||||
|
A |
= 5,000 units ÷ 1,000 units |
= 5 |
A |
= 5,000 units × 4/5 h |
= 4,000 |
||
|
B |
= 7,000 units ÷ 1,000 units |
= 7 |
B |
= 7,000 units × 1.5 h |
= 10,500 |
||
|
C |
= 8,000 units ÷ 1,000 units |
= 8 |
C |
= 8,000 units × 2 h |
= 16,000 |
||
|
Tota |
= 20 |
Total |
30,500 |
||||
|
|
|
||||||
|
Other execution = Output ÷ 500 kg |
|
||||||
|
A |
= 5,000 ÷ 500 |
= 10 |
|
||||
|
B |
= 7,000 ÷ 500 |
= 14 |
|
||||
|
C |
= 8,000 ÷ 500 |
= 16 |
|
||||
|
Total |
= 40 |
|
|||||
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
A = 5,000 |
B = 7,000 |
C = 8,000 |
|
|
Materials [Output × Usage × MCPU] |
15,000 |
42,000 |
100,000 |
|
|
Labour [Output × DLHPU × Rs 6] |
30,000 |
84,000 |
120,000 |
|
|
Prime cost |
45,000 |
126,000 |
220,000 |
|
|
Add: Overheads: (based on ABC) |
|
|
|
|
|
Production schedule cost |
[Production runs × Rs 1,500] |
7,500 |
10,500 |
12,000 |
|
Maintenance expenses |
[Machine hour × Re 0.50] |
2,000 |
5,250 |
8,000 |
|
Indirect labour |
[Direct labour hour × Rs 1.60] |
8,000 |
22,400 |
32,000 |
|
Set up |
[Production runs × Rs 1,421.5] |
7,108 |
9,951 |
11,372 |
|
Order execution |
[Order execution × Rs 498] |
4,980 |
6,972 |
7,968 |
|
Total cost |
74,588 |
181,073 |
291,340 |
|
|
Output |
5,000 |
7,000 |
8,000 |
|
|
Cost per unit (CPU) = Total cost ÷ Output |
14.92 |
25.87 |
36.42 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2065, Q: 16
AE Manufacturing Company produces three products namely P, Q and R using the same plant and similar production process. The detail information of the products and cost are summarized below:
|
Production |
Output in units |
DLH per unit |
MH per unit |
Direct materials cost per unit |
Direct labour cost per unit |
Production runs per product |
|
P |
2,500 |
3 |
1.5 |
Rs 15 |
Rs 6 |
15 |
|
Q |
3,000 |
4 |
1.5 |
Rs 18 |
Rs 8 |
8 |
|
R |
4,000 |
4.5 |
2.0 |
Rs 20 |
Rs 9 |
12 |
Other information regarding overhead cost and suitable cost driver are given below:
|
Cost pool |
Amount |
Cost driver |
|
Schedule cost |
35,000 |
Production run |
|
Set up cost |
37,500 |
Production run |
|
Indirect labour cost |
75,000 |
Direct labour hours |
|
Repair and maintenance |
40,000 |
Machine hours |
Required: (1) Total cost and cost per unit under traditional costing system using labour hour
(2) Total cost and cost per unit under ABC using suitable cost driver
(3) Comparative statement of unit cost under two methods
[Answer: (1) TC = Rs 90,000; Rs 138,000; Rs 206,000;
CPU = Rs 36; Rs 46; Rs 51.50;
(2) TC = Rs 107,796; Rs 129,641; Rs 196,537;
CPU = Rs 43.12; Rs 43.21; Rs 49.13;
(3) Difference: P = -7.12; Q: = +2.79; R = + 2.37;
*CDR = Rs 1,000; Rs 1,071.43; Rs 2; Rs 2.46
CPU = Rs 79; Rs 74; Rs 70]
SOLUTION
Given and working note:
|
Total labour hours |
= Output × LHPU |
|
Labour hour rate |
|
P |
= 2,500 × 3 |
= 7,500 |
= Total cost ÷ Total labour hour |
|
Q |
= 3,000 × 4 |
= 12,000 |
= 187500 ÷ 37,500 |
|
R |
= 4,000 × 4.5 |
= 18,000 |
= Rs 5 per hour |
|
|
Total |
= 37,500 |
|
Cost Statement under Traditional Costing
|
Particulars |
P |
Q. |
R |
|
Direct materials [Output × MCPU] |
37,500 |
54,000 |
80,000 |
|
Direct labour [Output × LHPU] |
15,000 |
24,000 |
36,000 |
|
Prime cost |
52,500 |
78,000 |
116,000 |
|
Add: Overhead (based on labour hours) |
37,500 |
60,000 |
90,000 |
|
Total cost |
Rs 90,000 |
Rs 138,000 |
Rs 206,000 |
|
Output |
2,500 |
3,000 |
4,000 |
|
Cost per unit = Total cost ÷ Output |
Rs 36 |
Rs 46 |
Rs 51.5 |
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost driver |
Total cost driver |
CDR |
|
Schedule Costing |
35,000 |
Production Runs |
35 |
1,000.00 |
|
Set Up Cost |
37,500 |
Production Runs |
35 |
1,071.43 |
|
Indirect Labour |
75,000 |
Direct Labour |
37,500 |
2.00 |
|
Repairs and Maintenance |
40,000 |
Machine Hours |
16,250 |
2.46 |
Given and working note for cost driver:
|
Production runs |
|
Machine hours |
= Output × MHPU |
|
|
= P + Q + R |
|
P |
= 2,500 × 1.5 |
= 3,750 |
|
= 15 + 8 + 12 |
|
Q |
= 3,000 × 1.5 |
= 4,500 |
|
= 35 |
|
R |
= 4,000 × 2 |
= 8,000 |
|
|
|
|
Total |
= 16,250 |
Cost Statement under Activities Based Costing
|
|
P |
Q |
R |
|
|
Direct materials [Output × MCPU] |
37,500 |
54,000 |
80,000 |
|
|
Direct labour [Output × LHPU] |
15,000 |
24,000 |
36,000 |
|
|
Prime cost |
52,500 |
78,000 |
116,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
|
Schedule costing |
[Production runs × Rs 1,000] |
15,000 |
8,000 |
12,000 |
|
Set up cost |
[Production runs × Rs 1,071.43] |
16,071 |
8,571 |
12,857 |
|
Indirect labour |
[Direct labour × Rs 2] |
15,000 |
24,000 |
36,000 |
|
Repairs and maintenance |
[Machine hours × Rs 2.46] |
9,225 |
11,070 |
19,680 |
|
Total cost |
Rs 107,796 |
Rs 129,641 |
Rs 196,537 |
|
|
Output |
2,500 |
3,000 |
4,000 |
|
|
Cost per unit = Total cost ÷ Output |
Rs 43.12 |
Rs 43.21 |
Rs 49,13 |
|
Comparatives of cost per unit
|
|
P |
Q |
R |
|
Traditional costing |
Rs 36.00 |
Rs 46.00 |
51.50 |
|
Activity based costing |
Rs 43.12 |
Rs 43.21 |
49.13 |
|
Difference |
(Rs 7.12) |
Rs 2.79 |
Rs 2.37 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2066, Q: 16
A Manufacturing Company manufactures three products namely M, N and O. The details regarding products and their overhead cost and related cost driver for a period are as follows:
|
Cost pool |
Cost (Rs ) |
Cost driver |
|
Repair cost |
16,000 |
Machine hours |
|
Schedule cost |
30,000 |
Production runs |
|
Materials handling |
32,000 |
Quantity of materials |
|
Set up cost |
30,000 |
No. of set up |
Data for the period are:
|
Production |
Output |
LH |
MH |
No. of set up |
Materials cost |
Materials |
Production |
|
|
|
Per unit |
Per unit |
|
per unit |
per unit |
runs |
|
M |
2,000 |
3 |
3 |
3 |
200 |
2 |
3 |
|
N |
4,000 |
2 |
5 |
6 |
150 |
2 |
4 |
|
O |
2,000 |
2 |
3 |
3 |
150 |
2 |
3 |
Further information:
· Direct labour cost per hour Rs 4
Required: statement of total cost and cost per unit for each product by using:
(1) Conventional absorption costing on the basis of labour hour
(2) An activity based costing using suitable cost drivers
[Answer: (1) TC: M = Rs 460,000; N = Rs 680,000; O = Rs 340,000;
CPU: M = Rs 230; N = Rs 170; O = Rs 170;
(2) TC: M = Rs 451,500; N = Rs 685,000; O = Rs 343,500;
CPU: M = Rs 225.75; N = Rs 171.25; O = Rs 171.75;
* Qty of materials = Output x MPU]
SOLUTION
Given and working note:
|
Labour hours |
= Output × LHPU |
|
Labour hours rate |
|
M |
= 2,000 × 3 |
= 6,000 |
= Total overhead ÷ Total labour hours |
|
N |
= 4,000 × 2 |
= 8,000 |
= Rs 108,000 ÷ 18,000 hours |
|
O |
= 2,000 × 2 |
= 4,000 |
= Rs 6 |
|
|
Total |
= 18,000 |
|
Cost Statement under Conventional Costing
|
Particulars |
Products |
||
|
|
M = 2,000 |
N = 4,000 |
O = 2,000 |
|
Direct materials [Output × RCPU] |
400,000 |
600,000 |
300,000 |
|
Direct labour [Output × LHPU × Rs 4] |
24,000 |
32,000 |
16,000 |
|
Prime cost |
424,000 |
632,000 |
316,000 |
|
Add: Overhead (based on labour hours): |
|
|
|
|
Labour expenses (LH × LHR) |
36,000 |
48,000 |
24,000 |
|
Total cost |
Rs 460,000 |
Rs 680,000 |
Rs 340,000 |
|
Output |
2,000 |
4,000 |
2,000 |
|
Cost per unit s = Total cost ÷ Output |
Rs 230 |
Rs 170 |
Rs 170 |
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Repair cost |
16,000 |
Machine hours |
32,000 |
0.50 |
|
Schedule cost |
30,000 |
Production runs |
10 |
3,000.00 |
|
Materials handling |
32,000 |
Quantity of materials |
16,000 |
2.00 |
|
Set up cost |
30,000 |
No. of set up |
12 |
2,500.00 |
Working note for total cost driver:
|
Machine hours |
= Output × MHPU |
|
Production runs |
|
M |
= 2,000 × 3 |
= 6,000 |
= M + N + O |
|
N |
= 4,000 × 5 |
= 20,000 |
= 3 + 4 + 3 |
|
O |
= 2,000 × 3 |
= 6,000 |
= 10 |
|
|
|
= 32,000 |
|
|
|
|
||
|
|
|
||
|
Quantity of materials |
= Output × MPU |
|
No. of set up |
|
M |
= 2,000 × 2 |
= 4,000 |
= M + N + O |
|
N |
= 4,000 × 2 |
= 8,000 |
= 3 + 6 + 3 |
|
O |
= 2,000 × 2 |
= 4,000 |
= 12 |
|
|
|
= 16,000 |
|
Cost Statement under ABC
|
Particulars |
Products |
|||
|
|
M |
N |
O |
|
|
Direct materials [Output × RCPU] |
400,000 |
600,000 |
300,000 |
|
|
Direct labour [Output × LHPU × Rs 4] |
24,000 |
32,000 |
16,000 |
|
|
Prime cost |
424,000 |
632,000 |
316,000 |
|
|
Add: Overhead (based on ABC): |
|
|
|
|
|
Repair cost |
[Machine hours × Re 0.50] |
3,000 |
10,000 |
3,000 |
|
Schedule cost |
[Production runs × Rs 3,000] |
9,000 |
12,000 |
9,000 |
|
Materials handling |
[Qty of materials × Rs 2] |
8,000 |
16,000 |
8,000 |
|
Set up cost |
[No. of set up × Rs 2,500] |
7,500 |
15,000 |
7,500 |
|
Total cost |
Rs 451,500 |
Rs 685,000 |
Rs 343,500 |
|
|
Output |
2,000 |
4,000 |
2,000 |
|
|
Cost per unit s = Total cost ÷ Output |
Rs 225.75 |
Rs 171.25 |
Rs 171.75 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2068, Q: 16 Or
A Manufacturing Company provides following information regarding the products and cost relating to their production:
|
|
A |
B |
C |
|
Unit produced |
18,000 |
14,000 |
10.000 |
|
Production runs |
9 |
7 |
5 |
|
Machine hours per unit |
5 |
4 |
3 |
|
Sales order received |
18 |
14 |
10 |
|
DLHs used per unit |
7.5 |
6 |
4.5 |
|
Raw materials per unit |
Rs 55 |
Rs 60 |
Rs 48 |
|
Variable overhead per unit |
Rs 21.5 |
Rs 23 |
Rs 11.75 |
The total production overheads for the period with cost are given below:
|
Cost pools |
Overhead cost to cost pool (Rs) |
|
Materials handling and dispatches cost |
35,700 |
|
Machine handling cost |
110,000 |
|
Store receiving cost |
27,000 |
|
Inspection cost |
22,050 |
|
Machine set ups cost |
27,510 |
|
|
222,260 |
Other information:
The DLH rate is Rs 2.50 per hour.
The numbers of requisition raised on the store were 25 for each product.
The production overhead is presently is presently apportioned on the basis of machine hours.
Required: (a) Unit cost under traditional volume based costing system and unit selling price at 20% profit on cost.
(b) Unit cost under ABC system showing cost driver rate with cost product of each cost pool and unit selling price at 120% of cost.
[Answer: (1a) TC: A = Rs 18,28,156; B = Rs 14,42,719; C = Rs 7,47,885;
CPU: A = Rs 101.56; B = Rs 103.05; C = Rs 74.79;
Profit: A = Rs 20.31; B = Rs 20.61; C = Rs 14.96;
(b) TC: A = Rs 18,16,290; B = Rs 14,44,420; C = Rs 7,58,050;
CPU: A = Rs 100.91; B = Rs 103.17; C = Rs 75.81;
Profit: A = Rs 20.18; B = Rs 20.63; C = Rs 15.16]
*Requisition raised A = 25; B = 25; C =25
SOLUTION
Given and working note:
|
Machine hours |
= Output × MHPU |
|
Labour hours rate |
|
A |
= 18,000 × 5 |
= 90,000 |
= Total overhead ÷ Total labour hours |
|
B |
= 14,000 × 4 |
= 56,000 |
= Rs 222,260 ÷ 176,000 hours |
|
C |
= 10,000 × 3 |
= 30,000 |
= Rs 1.26284 |
|
|
Total |
= 176,000 |
|
Cost Statement under Conventional Costing
|
Particulars |
Products |
||
|
|
A = 18,000 |
B = 14,000 |
C = 10,000 |
|
Direct materials [Output × RCPU] |
9,90,000 |
8,40,000 |
4,80,000 |
|
Direct labour [Output × LHPU × Rs 2.5] |
3,37,500 |
2,10,000 |
1,12,500 |
|
Prime cost |
13,27,500 |
10,50,000 |
5,92,500 |
|
Add: Overhead (based on machine hours): |
|
|
|
|
Machine expenses (MH × MHR) |
1,13,656 |
70,719 |
37,885 |
|
Variable production overhead [Output × VOPU] |
3,87,000 |
3,22,000 |
1,17,500 |
|
Total cost |
Rs 18,28,156 |
Rs 14,42,719 |
7,47,885 |
|
Output |
18,000 |
14,000 |
10,000 |
|
Cost per unit s = Total cost ÷ Output |
Rs 101.56 |
Rs 103.05 |
Rs 74.79 |
|
Add: Profit |
20.31 |
20.61 |
14.96 |
|
Selling price per unit |
Rs 121.87 |
Rs 123.66 |
Rs 89.75 |
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Materials handling and dispatches cost |
35,700 |
Sales order received |
42 |
850 |
|
Machine handling cost |
110,000 |
Machine hours |
176,000 |
0.625 |
|
Store receiving cost |
27,000 |
Requisition raised |
75 |
360 |
|
Inspection cost |
22,050 |
Production run |
21 |
1,050 |
|
Machine set ups cost |
27,510 |
Production run |
21 |
1,310 |
Working note for total cost driver:
|
Sales order received |
Requisition raised |
Production run |
|
= A + B + C |
= A + B + C |
= A + B + C |
|
= 18 + 14 + 10 |
= 25 + 25 + 25 |
= 9 + 7 + 5 |
|
= 42 |
= 75 |
= 21 |
Cost Statement under ABC
|
Particulars |
Products |
|||
|
|
A = 18,000 |
B = 14,000 |
C = 10,000 |
|
|
Direct materials [Output × RCPU] |
9,90,000 |
8,40,000 |
4,80,000 |
|
|
Direct labour [Output × LHPU × Rs 2.5] |
3,37,500 |
2,10,000 |
1,12,500 |
|
|
Prime cost |
13,27,500 |
10,50,000 |
5,92,500 |
|
|
Add: Variable production overhead [Output × VOPU] |
3,87,000 |
3,22,000 |
1,17,500 |
|
|
Add: Overhead (based on ABC): |
|
|
|
|
|
Materials H&D |
[Sales order received × Rs 850] |
15,300 |
11,900 |
8,500 |
|
Machine handling cost |
[Machine hours × Re 0.625] |
56,250 |
35,000 |
18,750 |
|
Store receiving cost |
[Requisition raised × Rs 360] |
9,000 |
9,000 |
9,000 |
|
Inspection cost |
[Production run × Rs 1,050] |
9,450 |
7,350 |
5,250 |
|
Machine set ups cost |
[Production run × Rs 1,310] |
11,790 |
9,170 |
6,550 |
|
Total cost |
Rs 18,16,290 |
Rs 14,44,420 |
Rs 7,58,050 |
|
|
Output |
18,000 |
14,000 |
10,000 |
|
|
Cost per unit s = Total cost ÷ Output |
Rs 100.91 |
Rs 103.17 |
Rs 75.81 |
|
|
Add: Profit |
20.18 |
20.63 |
15.16 |
|
|
Selling price per unit |
Rs 121.09 |
Rs 123.80 |
Rs 90.97 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2072, Q: 16
A Manufacturing Company produces two types of products A and B. The company recently decided to charge volume based costing system to activity based costing system. To assess the effect of the change, the following data have been gathered:
|
Products |
Units |
Machine hour |
Production runs |
Prime cost |
Materials component |
|
A |
3,000 |
9,000 |
10 |
Rs 10,000 |
6,000 |
|
B |
2,000 |
4,000 |
5 |
Rs 8,000 |
8,000 |
The overhead cost and cost drivers are as follows:
|
Cost |
Cost drivers |
Amount |
|
Machine related activities |
Machine hours |
39,000 |
|
Set up cost |
Production runs |
30,000 |
|
Material handing cost |
No. of material components |
28,000 |
|
|
|
97,000 |
Required: Unit production cost: (a) Using conventional costing system; (b) Using ABC system;
(c) Comment on the results of two methods
[Answer: (a) TC: A = Rs 77,154; B = Rs 37,546; CPU: A = Rs 25.72; B = Rs 18.92;
(b) TC: A = Rs 69,000; B = Rs 46,000; CPU: A = Rs 23; B = Rs 23;
*CDR = 3; 2,000; 2;
SOLUTION:
Given and working note:
|
Machine hours |
Machine hours rate |
Production runs |
Materials component |
|
= A + B |
= Total overhead ÷ Total machine hours |
= A + B |
= A + B |
|
= 9,000 + 4,000 |
= Rs 97,000 ÷ 13,000 hours |
= 10 + 5 |
= 6,000 + 8,000 |
|
= 13,000 |
= Rs 7.4615 |
= 15 |
= 14,000 |
|
|
|
|
|
Cost Statement under Traditional Costing
|
Particulars |
A = 3,000 |
B = 2,000 |
|
Materials |
×××× |
×××× |
|
Labour |
×××× |
×××× |
|
Prime cost (given) |
10,000 |
8,000 |
|
Add: Overheads: (based on MH) [MH × MHR] |
67,154 |
29,846 |
|
Total cost |
Rs 77,154 |
Rs 37,846 |
|
Output |
3,000 |
2,000 |
|
Cost per unit = Total overhead ÷ Output |
Rs 25.72 |
Rs 18.92 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Machine related activities |
39,000 |
Machine hours |
13,000 |
3 |
|
Set up cost |
30,000 |
Production runs |
15 |
2,000 |
|
Material handing cost |
28,000 |
No. of material components |
14,000 |
2 |
Cost Statement under Activities Based Costing
|
Particulars |
A = 3,000 |
B = 2,000 |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost (given) |
10,000 |
8,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Machine related activities |
[Machine hours × Rs 3] |
27,000 |
12,000 |
|
Set up cost |
[Production runs × Rs 2,000] |
20,000 |
10,000 |
|
Material handing cost |
[No. of material components × Rs 2] |
12,000 |
16,000 |
|
Total cost |
Rs 69,000 |
Rs 46,000 |
|
|
Output |
3,000 |
2,000 |
|
|
Cost per unit = Total overhead ÷ Output |
Rs 23 |
Rs 23 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2075, Q: 17
A Manufacturing Company provided the following particulars for the period ended:
|
Items |
Cost drivers |
Products |
Overhead (Rs) |
||
|
|
|
P |
Q |
R |
|
|
Production runs |
– |
5,000 |
4,000 |
3,000 |
– |
|
Material purchasing cost |
Order executed |
7 |
8 |
3 |
36,000 |
|
Set up cost |
Production runs |
10 |
9 |
6 |
50,000 |
|
Maintenance cost |
Machine hours |
7,000 |
4,000 |
2,000 |
26,000 |
|
Materials handing cost |
Quantity of materials |
4,000 |
3,000 |
2,000 |
18,000 |
|
Direct materials cost per unit (Rs) |
– |
4 |
5 |
6 |
– |
|
Direct labour cost per unit (Rs) |
– |
6 |
5 |
4 |
– |
Required: Unit production cost: (a) Traditional costing system based on machine hours; (b) ABC system
[Answer: (a) TC: P = Rs 120,000; Q = Rs 80,000; R = Rs 50,000;
CPU: P = Rs 24; Q = Rs 20; R = Rs 16.67;
(b) TC: P = Rs 106,000; Q = Rs 88,000; R = Rs 56,000;
CPU: P = Rs 21.20; Q = Rs 22; R = Rs 18.57;
*CDR = 2,000; 2,000; 2; 2;
SOLUTION
Given and working note:
|
Total overhead |
Order executed |
|
= 36,000 + 50,000 + 26,000 + 18,000 |
= P + Q + R |
|
= 130,000 |
= 7 + 8 + 3 |
|
|
= 18 |
|
Machine hours |
|
|
= P + Q + R |
Production runs |
|
= 7,000 + 4,000 + 2,000 |
= P + Q + R |
|
= 13,000 |
= 10 + 9 + 6 |
|
|
= 25 |
|
Machine hours rate |
|
|
= Total overhead ÷ Total labour hours |
Quantity of materials |
|
= Rs 130,000 ÷ 13,000 hours |
= P + Q + R |
|
= Rs 10 |
= 4,000 + 3,000 + 2,000 |
|
|
= 9,000 |
Cost Statement under Conventional Costing
|
Particulars |
Products |
||
|
|
P = 5,000 |
Q = 4,000 |
R = 3,000 |
|
Direct materials [Output × RCPU] |
20,000 |
20,000 |
18,000 |
|
Direct labour [Output × LHPU] |
30,000 |
20,000 |
12,000 |
|
Prime cost |
50,000 |
40,000 |
30,000 |
|
Add: Overhead (based on machine hours): |
|
|
|
|
Machine expenses (MH × MHR) |
70,000 |
40,000 |
20,000 |
|
Total cost |
Rs 120,000 |
Rs 80,000 |
Rs 50,000 |
|
Output |
5,000 |
4,000 |
3,000 |
|
Cost per unit s = Total cost ÷ Output |
Rs 24 |
Rs 20 |
Rs 16.67 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Material purchasing cost |
36,000 |
Order executed |
18 |
2,000 |
|
Set up cost |
50,000 |
Production runs |
25 |
2,000 |
|
Maintenance cost |
26,000 |
Machine hours |
13,000 |
2 |
|
Materials handing cost |
18,000 |
Quantity of materials |
9,000 |
2 |
Cost Statement under ABC
|
Particulars |
Products |
|||
|
|
P = 5,000 |
Q = 4,000 |
R = 3,000 |
|
|
Direct materials [Output × RCPU] |
20,000 |
20,000 |
18,000 |
|
|
Direct labour [Output × LHPU] |
30,000 |
20,000 |
12,000 |
|
|
Prime cost |
50,000 |
40,000 |
30,000 |
|
|
Add: Overhead (based on ABC): |
|
|
|
|
|
Material purchasing cost |
[Order executed × Rs 2,000] |
14,000 |
16,000 |
6,000 |
|
Set up cost |
[Production runs × Rs 2,000] |
20,000 |
18,000 |
12,000 |
|
Maintenance cost |
[Machine hours × Rs 2] |
14,000 |
8,000 |
4,000 |
|
Materials handing cost |
[Qty of materials × Rs 2] |
8,000 |
6,000 |
4,000 |
|
Total cost |
Rs 106,000 |
Rs 88,000 |
Rs 56,000 |
|
|
Output |
5,000 |
4,000 |
3,000 |
|
|
Cost per unit s = Total cost ÷ Output |
Rs 21.20 |
Rs 22.00 |
Rs 18.57 |
|
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Activity Based Costing | TU Questions | Traditional Costing | Total Cost | Cost Per Unit
Activity Based Costing, TU Solution contents numerical problems and solution with clear working notes.
Manufacturing company prepares cost statement as per traditional costing system and activity based costing.
Direct materials and direct labour are recorded for prime cost.
There are two methods to calculate cost per unit.
Machine hour rate or labour hour rate is used for traditional costing system.
Cost tools are used to find out cost driver rate.
Overheads are calculated on the basis of cost driver rate in activity based costing.
Traditional Costing System | Conventional Costing
[Conventional costing system, absorption costing system, volume based costing system]
The tradition costing system was designed decades ago for costing.
There are two types of distribution under traditional costing system.
They are primary and secondary distribution of overhead.
Under primary costing, direct materials, direct labour and direct overhead are calculated.
Under secondary costing, labour hour based or machine hour based overhead are calculated.
Activity Based Costing | Concept of ABC
Direct materials and direct labour are the major elements of traditional cost accounting system.
The traditional system is suitable for those companies who produce goods in narrow range.
If company produces wide range of goods, overhead cost will be relatively higher to the direct cost.
And it may be difficult to allocation (share) fixed cost.
Activity based cost (ABC) was introduced by Robin Cooper in 1980 to resolves the difficulties of assigning overhead amount under traditional costing.
Then Robert S. Kaplan recommended it in 1988; it is recommended for:
· A wide range of products
· Product costing and profitability
· Distribution and controlling overheads appropriately (properly)
ABC helps to better understanding about overhead cost.
It helps to allocation overheads in systematic and scientific way.
Activities are transaction, events, tasks or unit of work for producing goods.
ABC is also called transaction based costing.
Cost driver | Cost indicator | Cost pools
|
SN |
Activities or Transactions |
Cost Drivers |
|
1. |
Material procurement, Order execution |
No. of order |
|
2. |
Material handling |
No. of order executed, No. of movement |
|
3. |
Store |
No. of batch, Requisition raised |
|
4. |
Materials handling and dispatch |
Order executed, No. materials component, volume |
|
5. |
Dispatch of goods |
No. of dispatches |
|
6. |
Schedule cost, set up cost |
Production runs |
|
7. |
Materials inspections |
No. of inspections |
|
8 |
Repair and maintenance, short term variable cost |
Machine hours |
|
9. |
Power |
Horse power |
|
10. |
Production scheduling |
No. of production scheduling |
|
11. |
Engineering cost |
No. of set up, No. of product change, No. of tool change |
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2054/Cancelled, Q: 7
A Manufacturing Company applying activity based costing system provides you the following details about the cost and cost drivers:
|
Items |
Cost in Rs |
Cost drivers |
|
Procurement cost |
20,000 |
No. of order |
|
Repairs |
60,000 |
Machine hours |
|
Set up cost |
18,000 |
No. of production run |
Output and related activities are as follows:
|
Products |
Output units |
No. of order |
Machine hours used |
No. of production run |
|
A |
10,000 |
40 |
15,000 |
3 |
|
B |
20,000 |
60 |
15,000 |
6 |
Required: Overhead rate per unit
[Answer: Total cost: A = Rs 44,000; B = Rs 54,000;
Overhead rate: A = Rs 4.40; B = Rs 2.70] *CDR = 200; 2; 2,000
SOLUTION:
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Procurement cost |
20,000 |
No. of order |
100 |
200 |
|
Repairs |
60,000 |
Machine hours |
30,000 |
2 |
|
Set up cost |
18,000 |
No. of production run |
9 |
2,000 |
Cost Statement under Activities Based Costing
|
Particulars |
A = 10,000 |
B = 10,000 |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Procurement cost |
[No. of order × Rs 200] |
8,000 |
12,000 |
|
Repairs |
[Machine hours × Rs 2] |
30,000 |
30,000 |
|
Set up cost |
[No. of production run × Rs 2,000] |
6,000 |
12,000 |
|
Total overhead |
Rs 44,000 |
Rs 54,000 |
|
|
Output |
10,000 |
20,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 4.40 |
Rs 2.70 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2055, Q: 11
A Manufacturing Company manufactures two products by using similar equipment and methods.
(i) Details of two products and relevant information are given below:
|
Particulars |
Product P1 |
Product P2 |
|
Actual output in units |
3,000 |
5,000 |
|
Machine hours per units |
3 |
2 |
|
Labour hour per unit |
1 |
2 |
(ii) Overhead for the period:
Machine related activity Rs 38,000
Production set up activity Rs 14,000
(iii) The number of set ups in the product P1 and P2 were 8 and 6 respectively.
Required: Total cost for each product if overhead rate per unit is absorbed in:
(a) Labour hour absorbed rate; (b) Activity based costing by using suitable cost drivers
[Answer: (a) Total overhead: A = Rs 12,000; B = Rs 40,000;
Overhead per unit: A = Rs 4; B = Rs 8;
(b) Total overhead: A = Rs 26,000; B = Rs 26,000;
Overhead per unit: A = Rs 8.67; B = Rs 5.20] *CDR: 2; 1,000
SOLUTION:
Given and working note:
|
Labour hours |
= Output × LHPU |
|
Labour hour rate |
|
P1 |
= 3,000 × 1 |
= 3,000 |
= Total overhead ÷ Total labour hours |
|
P2 |
= 5,000 × 2 |
= 10,000 |
= (Rs 38,000 + 14,000) ÷ 13,000 |
|
|
Total |
= 13,000 |
= Rs 4 |
|
|
|
||
|
|
|
||
|
Machine hours |
= Output × MHPU |
|
No. of set ups |
|
P1 |
= 3,000 × 3 |
= 9,000 |
= P1 + P2 |
|
P2 |
= 5,000 × 2 |
= 10,000 |
= 8 + 6 |
|
|
Total |
= 15,000 |
= 14 |
|
|
|
||
Cost Statement under Traditional Costing
|
Particulars |
P1 = 3,000 |
P2 = 5,000 |
|
Materials |
×××× |
×××× |
|
Labour |
×××× |
×××× |
|
Prime cost |
Nil |
Nil |
|
Add: Overheads: (based on LH) [DLH × LH rate] |
12,000 |
40,000 |
|
Total overhead |
Rs 12,000 |
Rs 40,000 |
|
Output |
3,000 |
5,000 |
|
Overhead per unit = Total overhead ÷ Output |
Rs 4 |
Rs 8 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Machine related activity |
38,000 |
Machine hours |
19,000 |
2 |
|
Production set up activity |
14,000 |
No. of set ups |
14 |
1,000 |
Cost Statement under Activities Based Costing
|
Particulars |
P1 = 3,000 |
P2 = 5,000 |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Machine related activity |
[Machine hours × Rs 2] |
18,000 |
20,000 |
|
Production set up activity |
[No. of set up × Rs 1,000] |
8,000 |
6,000 |
|
Total overhead |
Rs 26,000 |
Rs 26,000 |
|
|
Output |
3,000 |
5,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 8.67 |
Rs 5.20 |
|
######
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|
Accounting Equation |
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|
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|
|
Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cashbook |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
|
######
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2056, Q: 10
A Manufacturing Company has a single production process. Three products P, Q and R are produced by the workers. The wage rate per hour is Rs 4. The budget information have been obtained for the year are as follows:
|
Products |
Production |
Materials |
Material cost |
Labour hour |
Machine hour |
Batches |
|
|
units |
per unit |
Per unit |
Per unit |
Per unit |
|
|
P |
2,000 |
2 |
Rs 3 |
0.50 hour |
1.00 hour |
6 |
|
Q |
1,000 |
3 |
Rs 5 |
0.25 hour |
0.25 hour |
5 |
|
R |
500 |
4 |
Rs 2 |
1.00 hour |
1.50 hours |
4 |
Total overhead cost and related cost drivers are:
|
Overheads |
Cost drivers |
Amount (Rs) |
|
Materials receipt and inspections |
No. of batches |
30,000 |
|
Materials handling |
Quantity of materials |
18,000 |
|
Short-term variable cost |
Machine hours |
6,000 |
Required: By using activity base costing, find out: (a) Cost driver rate; (b) Total cost for each product; (c) Cost per unit
[Answer: (a) CDR = 2,000; 2; 2;
(b) Total cost: P = Rs 14,000; Q = Rs 22,500; R = Rs 16,500;
(c) CPU: P = Rs 17; Q = Rs 22.50; R = Rs 33]
SOLUTION:
Given and working note for cost driver:
|
No. of batches |
Labour hour = Output × LHPU |
|||||
|
= P + Q + R |
P |
= 2,000 × 0.5 hour |
= 1,000 |
|||
|
= 6 + 5 + 4 |
Q |
= 1,000 × 0.25 hour |
= 250 |
|||
|
= 15 |
R |
= 500 × 1 hour |
= 500 |
|||
|
|
|
|
= 2,000 |
|||
|
|
|
|||||
|
|
|
|||||
|
Machine hour = Output × MHPU |
Quantity of materials = Output × Material per unit |
|||||
|
P |
= 2,000 × 1 hour |
= 2,000 |
P |
= 2,000 × 2 |
= 4,000 units |
|
|
Q |
= 1,000 × 0.25 hour |
= 250 |
Q |
= 1,000 × 3 |
= 3,000 units |
|
|
R |
= 500 × 1.50 hours |
= 750 |
R |
= 500 × 4 |
= 2,000 units |
|
|
|
|
= 3,000 |
|
|
= 9,000 |
|
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Materials receipt and inspections |
30,000 |
No. of batches |
15 |
2,000 |
|
Materials handling |
18,000 |
Quantity of materials |
9,000 |
2 |
|
Short-term variable cost |
6,000 |
Machine hours |
3,000 |
2 |
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
P = 2,000 |
Q = 1,000 |
R = 500 |
|
|
Materials [Output × MCPU] |
6,000 |
5,000 |
1,000 |
|
|
Labour [Output × LHPU × Rs 4] |
4,000 |
1,000 |
2,000 |
|
|
Prime cost |
10,000 |
6,000 |
3,000 |
|
|
Add: Overheads (based on ABC): |
|
|
|
|
|
Materials receipt and inspections |
[No. of batches × Rs 2,000] |
12,000 |
10,000 |
8,000 |
|
Materials handling |
[Qty of materials × Rs 2] |
8,000 |
6,000 |
4,000 |
|
Short-term variable cost |
[Machine hour × Rs 2] |
4,000 |
500 |
1,500 |
|
Total cost |
Rs 34,000 |
Rs 22,500 |
Rs 16,500 |
|
|
Output |
2,000 |
1,000 |
500 |
|
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 17.00 |
Rs 22.50 |
Rs 33.00 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2058, Q: 10
A Manufacturing Company manufactures two products namely X and Y. Data for the past period are as follows:
|
Particulars |
Product X |
Product Y |
|
Output in units |
2,000 |
3,000 |
|
Machine hours per unit |
2 hours |
1 hour |
|
Labour hours per unit |
2 hours |
3 hours |
|
Production runs |
7 |
3 |
Total production overhead recorded and cost driver fixed by the cost accounting department is analysed as:
|
Cost |
Cost drivers |
Amount |
|
Set up cost |
Production runs |
20,000 |
|
Machine department |
Machine hours |
14,000 |
|
Scheduling cost |
Production runs |
+ 18,000 |
|
|
|
Total 52,000 |
Required: (a) Overhead rate by using labour rate; (b) Overhead rate under ABC
[Answer: (a) Total overhead: X = Rs 16,000; Y = Rs 36,000; CPU: X = Rs 8; Y = Rs 12;
(b) Total overhead: X = Rs 34,600; Y = Rs 17,400; CPU: X = Rs 17.30; Y = Rs 5.30]
*CDR = Rs 2,000; Rs 2; Rs 1,800]
SOLUTION:
Given and working note:
|
Labour hours |
= Output × LHPU |
|
Labour hour rate (LHR) |
|
X |
= 2,000 × 2 |
= 4,000 |
= Total overhead ÷ Total labour hours |
|
Y |
= 3,000 × 3 |
= 9,000 |
= Rs 52,000 ÷ 13,000 |
|
|
Total |
= 13,000 |
= Rs 4 |
|
|
|
||
|
|
|
||
|
Machine hours |
= Output × MHPU |
|
Production runs |
|
X |
= 2,000 × 2 |
= 4,000 |
= X + Y |
|
Y |
= 3,000 × 1 |
= 3,000 |
= 7 + 3 |
|
|
Total |
= 7,000 |
= 10 |
|
|
|
||
Cost Statement under Traditional Costing
|
Particulars |
X = 2,000 |
Y = 3,000 |
|
Materials |
×××× |
×××× |
|
Labour |
×××× |
×××× |
|
Prime cost |
Nil |
Nil |
|
Add: Overheads: (based on LH) [DLH × LHR] |
16,000 |
36,000 |
|
Total overhead |
Rs 16,000 |
Rs 36,000 |
|
Output |
2,000 |
3,000 |
|
Overhead per unit = Total overhead ÷ Output |
Rs 8 |
Rs 12 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Set up cost |
20,000 |
Production runs |
10 |
2,000 |
|
Machine department |
14,000 |
Machine hours |
7,000 |
2 |
|
Scheduling cost |
18,000 |
Production runs |
10 |
1,800 |
Cost Statement under Activities Based Costing
|
Particulars |
X = 2,000 |
Y = 3,000 |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Set up cost |
[Production runs × Rs 2,000] |
14,000 |
6,000 |
|
Machine department |
[Machine hours × Rs 2] |
8,000 |
6,000 |
|
Scheduling cost |
[Production runs × Rs 1,800] |
12,600 |
5,400 |
|
Total overhead |
Rs 34,600 |
Rs 17,400 |
|
|
Output |
2,000 |
3,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 17.30 |
Rs 5.30 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2059, Q: 10
A Manufacturing Company produces two types of products. The president of the company recently decided to change from a volume based costing system to an activity based costing system. To assess the effect of the change, the following data have been gathered:
|
Products |
Units |
Machine hours |
Production runs |
Prime cost |
Materials components |
|
A |
3,000 |
9,000 |
10 |
Rs 10,000 |
6,000 |
|
B |
2,000 |
4,000 |
5 |
Rs 8,000 |
8,000 |
|
Total |
|
13,000 |
15 |
|
14,000 |
The overhead cost and cost drivers are as follows:
|
Cost |
Cost drivers |
Amount |
|
Machine related activities |
Machine hours |
39,000 |
|
Set up costs |
Production runs |
30,000 |
|
Materials handling cost |
No. of material components |
+ 28,000 |
|
|
|
Total 67,000 |
Required: (a) Cost driver rate for each item by using ABC; (b) Total cost of each product by using cost driver rate
[Answer: (a) CDR = Rs 3; Rs 2,000; Rs 2; (b) TC: A = Rs 69,000; B = Rs 46,000;
CPU = A = Rs 23; B = Rs 23]
SOLUTION:
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Machine related activities |
39,000 |
Machine hours |
13,000 |
3 |
|
Set up costs |
30,000 |
Production runs |
15 |
2,000 |
|
Materials handling cost |
28,000 |
No. of material components |
14,000 |
2 |
Cost Statement under Activities Based Costing
|
Particulars |
A = 3,000 |
B = 2,000 |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost (given) |
10,000 |
8,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Machine related activities |
[Machine hours × Rs 3] |
27,000 |
12,000 |
|
Set up costs |
[Production runs × Rs 2,000] |
20,000 |
10,000 |
|
Materials handling cost |
[No. of material components × Rs 2] |
12,000 |
16,000 |
|
Total overhead |
Rs 69,000 |
Rs 46,000 |
|
|
Output |
3,000 |
2,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 23 |
Rs 23 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2060/Second, Q: 8
A Company manufactures three products P1, P2 and P3 using the same equipment and process. The following information relates to a production period:
|
Particulars |
P1 |
P2 |
P3 |
|
|
Units (produced) |
3,000 |
2,000 |
1,000 |
|
|
Labour hour per unit |
2 |
2 |
2 |
|
|
Machine hour per unit |
4 |
2 |
2 |
|
|
Set-up In numbers |
8 |
5 |
2 |
|
|
Order handled In period |
6 |
4 |
3 |
|
|
Direct labour rate per hour |
Rs 4 |
Rs 3 |
Rs 2 |
|
|
Direct material per unit |
Rs 16 |
Rs 18 |
Rs 24 |
|
The overheads for the period are:
Production set-up costs Rs 60,000
Material handling and dispatch Rs 26,000
Repair and maintenance Rs 9,000
Required: (1) Cost driver rate for each overhead
(2) Statement of total cost showing per unit for each product by using activity-based costing.
[Answer: (1) Cost Driver Rate = Rs 4,000; Rs 2,000; Re 0.50;
(2) Total cost = Rs 122,000; Rs 78,000; Rs 43,000;
CPU= Rs 40.67; Rs 39; Rs 43]
SOLUTION
Given and working note for cost driver:
|
No. of set ups |
No. of order handling |
||
|
= P1 + P2 + P3 |
= P1 + P2 + P3 |
||
|
= 8 + 5 + 2 |
= 6 + 4 + 3 |
||
|
= 15 |
= 13 |
||
|
|
|
||
|
Machine hour = Output × MHPU |
|
||
|
P1 |
= 3,000 × 4 hours |
= 12,000 |
|
|
P2 |
= 2,000 × 2 hours |
= 4,000 |
|
|
P3 |
= 1,000 × 2 hours |
= +2,000 |
|
|
|
= 18,000 |
|
|
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
Cost Driver Rate |
|
Production set up |
60,000 |
Set up |
15 |
4,000.00 |
|
Materials handling |
26,000 |
Order handling |
13 |
2,000.00 |
|
Repairs and maintenance |
9,000 |
Machine hour |
18,000 |
0.50 |
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
P1=3,000 |
P2=2,000 |
P3=1,000 |
|
|
Materials [Output × MCPU] |
48,000 |
36,000 |
24,000 |
|
|
Labour [Output × LHPU × Rs ] |
24,000 |
12,000 |
4,000 |
|
|
Prime cost |
72,000 |
48,000 |
28,000 |
|
|
Add: Overheads (based on ABC): |
. |
. |
. |
|
|
Production set up |
[Set up × Rs 4,000] |
32,000 |
20,000 |
8,000 |
|
Materials handling |
[Order handling × Rs 2,000] |
12,000 |
8,000 |
6,000 |
|
Repairs and maintenance |
[Machine hour × Re 0.5] |
6,000 |
2,000 |
1,000 |
|
Total cost |
Rs 122,000 |
Rs 78,000 |
Rs 43,000 |
|
|
Output |
3,000 |
2,000 |
1,000 |
|
|
Cost per unit (CPU) = Total cost ÷ Output |
Rs 40.67 |
Rs 39.00 |
Rs 43.00 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2061, Q: 7 Or
A Company has a single production process and it manufacturing three products A, B and C. The overhead costs and related cost driver for a period are:
|
Overhead costs |
Cost drives |
Amount |
|
Short term variable costs |
Machine hours |
16,000 |
|
Welfare expenses |
Direct labour hours |
36,000 |
|
Set-up costs |
Production runs |
8,000 |
|
Material handling |
Quality of materials |
24,000 |
Data for the period are:
|
Products |
A |
B |
C |
|
Output in units |
2,000 |
2,000 |
1,000 |
|
Materials per unit |
3 |
2 |
2 |
|
Labour hour per unit |
2 |
3 |
2 |
|
Machine hour per unit |
2 |
1.5 |
2 |
|
Production run for the period |
4 |
2 |
2 |
Required: (i) Overhead rate by using machine hour rate; (ii) Overhead rate by using activity based costing
[Answer: (i) Total overhead: Rs 37,333; Rs 28,000; Rs 18,667;
OHR: Rs 18.67; Rs 14 and Rs 18.67;
(ii) Total overhead: Rs 35,111; Rs 33,333; Rs 15,556;
OHR: Rs 17.56; Rs 16.67 and Rs 15.56]
SOLUTION
Given and working note:
|
Machine hours = Output × MHPU |
Machine hour rate |
||
|
A |
= 2,000 units × 2 hours |
= 4,000 |
= Total overhead (given) ÷ Total MH |
|
B |
= 2,000 units × 1.5 hours |
= 3,000 |
= Rs 84,000 ÷ 9,000 hours |
|
C |
= 1,000 units × 2 hours |
= 2,000 |
= Rs 28/3 or 9.333 |
|
Total |
= 9,000* |
|
|
Cost Statement under Traditional Costing
|
Particulars |
A |
B |
C |
|
Materials |
×××× |
×××× |
×××× |
|
Labour |
×××× |
×××× |
×××× |
|
Prime cost |
Nil |
Nil |
Nil |
|
Add: Overheads (based on MH) [MH × MH rate]: |
37,333 |
28,000 |
18,667 |
|
Total overhead |
Rs 37,333 |
Rs 28,000 |
Rs 18,667 |
|
Output |
2,000 |
2,000 |
1,000 |
|
Overhead per unit = Total overhead ÷ Output |
Rs 18.67 |
Rs 14.00 |
Rs 18.67 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Short term variance |
16,000 |
Machine hour |
9,000* |
16/9 |
|
Welfare expenses |
36,000 |
Direct labour hour |
12,000 |
3.00 |
|
Set up cost |
8,000 |
Production runs |
8 |
1,000.00 |
|
Materials handling |
24,000 |
Quantity of materials |
12,000 |
2.00 |
Given and working note for cost driver:
|
Direct labour hour = Output × DLHPU |
Production runs |
||||
|
A |
= 2,000 units × 2 hours |
= 4,000 |
= A + B + C |
||
|
B |
= 2,000 units × 3 hours |
= 6,000 |
= 4 + 2 + 2 |
||
|
C |
= 1,000 units × 2 hours |
= 2,000 |
= 8 |
||
|
|
Total |
= 12,000 |
|
||
|
|
|
||||
|
Qty of materials = Output × MPU |
|
||||
|
A |
= 2,000 units × 3 |
= 6,000 |
|
||
|
B |
= 2,000 units × 2 |
= 4,000 |
|
||
|
C |
= 1,000 units × 2 |
= 2,000 |
|
||
|
|
Total |
= 12,000 |
|
||
Statement of Cost under Activity Based Costing (ABC)
|
Particulars |
Products |
|||
|
|
A |
B |
C |
|
|
Materials |
×××× |
×××× |
×××× |
|
|
Labour |
×××× |
×××× |
×××× |
|
|
Prime cost |
Nil |
Nil |
Nil |
|
|
Add: Overheads (based on ABC) |
|
|
|
|
|
Short term variance |
[Machine hour × Rs 16/9] |
7,111 |
5,333 |
3,556 |
|
Welfare expenses |
[Direct labour hour × Rs 3] |
12,000 |
18,000 |
6,000 |
|
Set up cost |
[Production runs × Rs 1,000] |
4,000 |
2,000 |
2,000 |
|
Materials handling |
[Quantity of materials × Rs 2] |
12,000 |
8,000 |
4,000 |
|
Total overhead |
Rs 35,111 |
Rs 33,333 |
Rs 15,556 |
|
|
Output |
2,000 |
2,000 |
1,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 17.56 |
Rs 16.67 |
Rs 15.56 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2061/second, Q: 7
The following are the particulars of an industry that manufactures two products:
|
Particulars |
PX |
PY |
|
Output in units |
4,000 |
6,000 |
|
Labour hour per unit |
3/4 |
1/2 |
|
Number of production run |
20 |
30 |
|
Number of supervision per production run |
4 |
5 |
|
Machine hour per unit |
1.5 |
1 |
The expenses incurred for the realization of the above output are as follows:
|
Overheads: |
Production setting |
Supervision |
Machine operation |
|
Amount: |
Rs 25,000 |
Rs 23,000 |
Rs 24,000 |
Required: (1) Overhead rate per unit traditional costing; (2) Overhead rate per unit activity based costing
[Answer: (1) Total overhead: Rs 36,000 and Rs 36,000; OPU = Rs 9 and Rs 6;
(2) Total overhead: Rs 30,000 and Rs 42,000; OPU = Rs 7.50 and Rs 7;
Supervision = No. of supervision x No. of Production runs]
SOLUTION
Given and working note:
|
Labour hours = Output × Labour hours per unit |
Labour hours rate |
||
|
X |
= 4,000 × 3/4 hour |
= 3,000 |
= Total overhead ÷ Total labour hours |
|
Y |
= 6,000 × 1/2 hour |
= 3,000 |
= Rs 72,000 ÷ 6,000 hours |
|
Total |
= 6,000 hours |
= Rs 12 per hour |
|
Cost Statement under Traditional Costing
|
Particulars |
X |
Y |
|
Materials |
×××× |
×××× |
|
Labour |
×××× |
×××× |
|
Prime cost |
×××× |
×××× |
|
Add: Overheads: (based on LH) [DLH × LH rate] |
36,000 |
36,000 |
|
Total overhead |
Rs 36,000 |
Rs 36,000 |
|
Output |
4,000 |
6,000 |
|
Overhead per unit = Total overhead ÷ Output |
Rs 9 |
Rs 6 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total CD |
CDR |
|
Production setting |
25,000 |
Production runs |
50 |
500 |
|
Supervision |
23,000 |
No. of supervision |
230 |
100 |
|
Machine operated |
24,000 |
Machine hour |
12,000 |
2 |
Given and working note for cost driver:
|
Production runs |
No. of supervision |
= Supervision × Production runs |
|
|
= X + Y |
X |
= 4 × 20 |
= 80 |
|
= 20 + 30 |
Y |
= 5 × 30 |
= 150 |
|
= 50 |
|
Total |
= 230 |
|
|
|||
|
|
Machine hour |
= Output × MHPU |
|
|
|
X |
= 4,000 × 1.5 |
= 6,000 |
|
|
Y |
= 6,000 × 1 |
= 6,000 |
|
|
|
Total |
= 12,000 |
Cost Statement under Activities Based Costing
|
Particulars |
X |
Y |
|
|
Direct materials |
×××× |
×××× |
|
|
Direct labour |
×××× |
×××× |
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Production setting |
[Production runs × Rs 500] |
10,000 |
15,000 |
|
Supervision |
[No of supervision × Rs 100] |
8,000 |
15,000 |
|
Machine operated |
[Machine hours × Rs 2] |
12,000 |
12,000 |
|
Total overhead |
Rs 30,000 |
Rs 42,000 |
|
|
Output |
4,000 |
6,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 7.5 |
Rs 7.0 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2062, Q: 7 Or
The summarized production and cost figures of a workshop are provided below:
|
Products |
Output in pieces |
Material cost per piece |
Labour hour per piece |
Production scheduling per 50 pieces |
|
Jar |
400 |
Rs 25 |
5 |
3 |
|
Plate |
600 |
Rs 30 |
2.5 |
3 |
|
Bowl |
500 |
Rs 20 |
3 |
4 |
Wage rate per hour is Rs 4
All production require five inspections in a lot of 25 pieces of each
One sales order execution contains 100 pieces of each.
The overhead for the period are outlined below:
|
Production scheduling |
Rs 20,000 |
|
Order execution expenses |
Rs 15,000 |
|
Inspection work expenses |
Rs 18,000 |
Required: (a) Total cost and cost per piece based on Traditional Costing;
(b) Total cost and cost per piece based on Activity Based Costing
[Answer: (a) Total cost = Rs 39,200; Rs 39,900; Rs 31,900;
CPU = Rs 98; Rs 66.50; Rs 63.80;
(b) Total cost = Rs 31,600; Rs 44,400; Rs 35,000;
SOLUTION
Given and working note:
|
Direct labour hour (DLH) = Output × LHPU |
DLH rate |
= Total overhead ÷ Total DLH |
|
|
Jar = 400 × 5 |
= 2,000 |
|
= Rs 53,000 ÷ 5,000 hours |
|
Plate = 600 × 2.5 |
= 1,500 |
|
= Rs 10.60 per hour |
|
Bowl = 500 × 3 |
= 1,500 |
|
|
|
Total |
= 5,000 hours |
|
|
Cost Statement under Traditional Costing
|
Particulars |
Jar |
Plate |
Bowl |
|
Direct Materials [Output × MCPU] |
10,000 |
18,000 |
10,000 |
|
Direct Labour [Output × LHPU × Rs 4] |
8,000 |
6,000 |
6,000 |
|
Prime cost |
18,000 |
24,000 |
16,000 |
|
Add: Overhead (based on labour hours, Output × Rs 10.60) |
21,200 |
15,900 |
15,900 |
|
Total cost |
Rs 39,200 |
Rs 39,900 |
Rs 31,900 |
|
Output |
400 |
600 |
500 |
|
Cost per unit = Total cost ÷ Output |
Rs 98.00 |
Rs 66.50 |
Rs 63.80 |
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver |
Total Cost Driver |
CDR |
|
Production scheduling |
20,000 |
Production schedule |
100 |
200 |
|
Order execution |
15,000 |
Order execution |
15 |
1,000 |
|
Inspection work |
18,000 |
No. of inspection |
300 |
60 |
Given and working note for cost driver:
|
Production schedule |
Order execution |
||||||
|
50 pieces needed |
= 3 Production run |
100 pieces needed |
= 1 order |
|
|||
|
400 jars need |
= 3 × 400 ÷ 50 |
= 24 |
400 jars need |
= 400 ÷ 100 |
= 4 |
||
|
600 plate need |
= 3 × 600 ÷ 50 |
= 36 |
600 plate need |
= 600 ÷ 100 |
= 6 |
||
|
500 bowl need |
= 4 × 500 ÷ 50 |
= 40 |
500 bowl need |
= 500 ÷ 100 |
= 5 |
||
|
|
Total |
= 100 |
|
Total |
= 15 |
||
|
|
|
||||||
|
No. of inspection |
|
||||||
|
25 pieces needed |
= 5 inspection |
|
|
||||
|
400 jars need |
= 5 × 400 ÷ 25 |
= 80 |
|
||||
|
600 plate need |
= 5 × 600 ÷ 25 |
= 120 |
|
||||
|
500 bowl need |
= 5 × 500 ÷ 25 |
= 100 |
|
||||
|
|
Total |
= 300 |
|
||||
Cost Statement under Activities Based Costing
|
Particulars |
Jar |
Plate |
Bowl |
|
|
Direct Materials [Output × MCPU] |
10,000 |
10,000 |
18,000 |
|
|
Direct Labour [Output × LHPU × Rs 4] |
8,000 |
8,000 |
6,000 |
|
|
Prime cost |
18,000 |
24,000 |
16,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
|
Schedule costing |
[Production runs × Rs 200] |
4,800 |
7,200 |
8,000 |
|
Order execution |
[Order execution × Rs 1,000] |
4,000 |
6,000 |
5,000 |
|
Inspection work |
[No. of inspection × Rs 60] |
4,800 |
7,200 |
6,000 |
|
Total cost |
Rs 31,600 |
44,400 |
35,000 |
|
|
Output |
400 |
600 |
500 |
|
|
Cost per unit = Total cost ÷ Output |
Rs 79 |
Rs 74 |
Rs 70 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2063, Q: 8
The following data pertain to a company which manufacturing two products X and Y:
|
|
Product X |
Product Y |
|
Output In units |
500 |
1,000 |
|
Machine hour per unit |
4 |
2 |
|
Direct labour hour per unit |
2 |
2 |
|
Production run for the period |
5 |
8 |
The overhead for the period and cost drives are:
|
Cost items |
Amount |
Cost drives |
|
Short term variable costs |
16,000 |
Machine hours |
|
Scheduling costs |
10,400 |
Production runs |
|
Set up costs |
5,200 |
Production runs |
|
Indirect labour |
9,000 |
Direct labour hours |
Required: (1) Cost driver rate for each item of overhead
(2) Total overhead costs and overhead per unit for each product by using ABC System
[Answer: (1) CDR = Rs 4, Rs 800, Rs 400 and Rs 3;
(2) Total cost = Rs 17,000 and Rs 23,600; OPU = Rs 34 and Rs 23.6]
SOLUTION
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
Short term variable cost |
16,000 |
Machine hours |
4,000 |
4 |
|
Scheduling cost |
10,400 |
Production runs |
13 |
800 |
|
Set up cost |
5,200 |
Production runs |
13 |
400 |
|
Indirect labour |
9,000 |
Direct labour hour |
3,000 |
3 |
Given and working note for cost driver:
|
Machine hour |
= Output × MHPU |
|
DLH |
= Output × DLHPU |
|
|
X |
= 500 × 4 hours |
= 2,000 |
X |
= 500 × 2 hours |
= 1,000 |
|
Y |
= 1,000 × 2 hours |
= 2,000 |
Y |
= 1,000 × 2 hours |
= 2,000 |
|
|
Total |
= 4,000 |
|
Total |
= 3,000 |
|
|
|
||||
|
Production runs |
|
||||
|
= X + Y |
|
||||
|
= 5 + 8 |
|
||||
|
= 13 |
|
||||
Cost Statement under Activities Based Costing
|
Particulars |
A |
B |
|
|
Direct Materials |
|
|
|
|
Direct Labour |
|
|
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Short term variable cost |
[Machine hours × Rs 4] |
8,000 |
8,000 |
|
Schedule costing |
[Production runs × Rs 800] |
4,000 |
6,400 |
|
Set up cost |
[Production runs × Rs 400] |
2,000 |
3,200 |
|
Indirect labour |
[Direct Labour × Rs 3] |
3,000 |
6,000 |
|
Total overhead |
Rs 17,000 |
Rs 23,600 |
|
|
Output |
500 |
1,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 34.00 |
Rs 23.60 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2064, Q: 8
A Company manufactures two products A and B. The following information for the period is provided:
|
Particulars |
Product A |
Product B |
|
Output In units |
1,000 |
1,000 |
|
Machine hour per unit |
1.5 |
1 |
|
Direct labour hour per unit |
2 |
3 |
|
Production run for the period |
3 |
2 |
The overhead costs are absorbed by product units using rate per direct labour hour and rate of overhead is Rs 16.
The apportionment of total overheads and their cost drives are as under:
|
Cost items |
Cost drives |
% of Apportionment |
|
Indirect labour |
Direct labour hours |
62.5% |
|
Scheduling costs |
Production runs |
25% |
|
Machine related costs |
Machine hours |
12.5% |
Required: (1) Total overhead costs for the period and amount of overhead for each item.
(2) Total overhead rate for each product by using cost driver rate
[Answer: (1) Total overhead = Rs 80,000; and Rs 50,000; Rs 20,000; Rs 10,000;
(2) Total overhead: A = Rs 38,000; B = Rs 42,000; OPU: A = Rs 38; B= Rs 42]
SOLUTION
Given and working note:
|
Direct labour hour = Output × DLHPU |
|||||
|
A |
= 1,000 units × 2 hours |
= 2,000 |
|||
|
B |
= 1,000 units × 3 hours |
= 3,000 |
|||
|
|
Total |
= 5,000 |
|||
|
|
|||||
|
|
|||||
|
Total overhead |
|||||
|
Labour hour rate |
= Total overhead ÷ Total labour hour |
||||
|
Rs 16 |
= Total overhead ÷ 5,000 DLH |
||||
|
Total overhead |
= Rs 16 × 5,000 DLH |
||||
|
|
= Rs 80,000 |
||||
|
|
|||||
|
Again, |
|||||
|
Indirect labour |
= 80,000@62.5% |
= Rs 50,000 |
|||
|
Schedule cost |
= 80,000@25% |
= Rs 20,000 |
|||
|
Machine expenses |
= 80,000@12.5% |
= Rs 10,000 |
|||
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver (CD) |
Total CD |
CD Rate |
|
Indirect labour |
50,000 |
Direct labour hour |
5,000 |
10 |
|
Schedule cost |
20,000 |
Production runs |
5 |
4,000 |
|
Machine related cost |
10,000 |
Machine hour |
2,500 |
4 |
Given and working note for cost driver:
|
Direct labour hour |
= Output × DLHPU |
|
|
A |
= 1,000 units × 2 hours |
= 2,000 |
|
B |
= 1,000 units × 3 hours |
= 3,000 |
|
|
Total |
= 5,000 |
|
|
||
|
Machine hour |
= Output × MHPU |
|
|
A |
= 1,000 × 1.5 hours |
= 1,500 |
|
B |
= 1,000 × 1 hour |
= 1,000 |
|
|
Total |
= 2,500 |
|
|
||
|
Production runs |
||
|
= A + B |
||
|
= 3 + 2 |
||
|
= 5 |
||
|
|
||
Cost Statement under Activities Based Costing
|
Particulars |
A |
B |
|
|
Direct materials |
|
|
|
|
Direct labour |
|
|
|
|
Prime cost |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Indirect labour |
[Direct labour × Rs 10] |
20,000 |
30,000 |
|
Schedule costing |
[Production runs × Rs 4,000] |
12,000 |
8,000 |
|
Machine expenses |
[Machine hours × Rs 4] |
6,000 |
4,000 |
|
Total overhead |
Rs 38,000 |
Rs 42,000 |
|
|
Output |
1,000 |
1,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 38 |
Rs 42 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2067, Q: 8 Or
A Manufacturing Company produces two products namely A and B. The Information related to products are as follows:
|
|
A |
B |
|
Output in units |
6,000 |
4,000 |
|
Labour hour per unit |
4 |
2 |
|
Machine hour per unit |
2 |
1 |
|
Production runs |
6 |
4 |
Total production overhead recorded and cost driver fixed by the cost department is analysied as:
|
|
Cost driver |
Amount (Rs) |
|
Set up cost |
Production run |
30,000 |
|
Machine department cost (MDC) |
Machine hours |
64,000 |
|
Scheduling cost |
Production run |
40,000 |
Required: (a) Cost driver rate by using activity based costing
(b) Total overhead cost and cost per unit of A and B under activity based costing
[Answer: (a) Cost driver rate = 3,000; 4; 4,000;
(b) Total overhead: A = Rs 90,000; B = Rs 44,000;
Overhead per unit: A = Rs 15; B = Rs 11]
SOLUTION:
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Set up cost |
30,000 |
Production run |
10 |
3,000 |
|
Machine department cost (MDC) |
64,000 |
Machine hours |
16,000 |
4 |
|
Scheduling cost |
40,000 |
Production run |
10 |
4,000 |
Working note for total cost driver:
|
Machine hours |
= Output × MHPU |
|
|
Production runs |
|
A |
= 6,000 × 2 |
= 12,000 |
|
= A + B |
|
B |
= 4,000 × 1 |
= 4,000 |
|
= 6 + 4 |
|
|
|
= 16,000 |
|
= 10 |
|
|
|
|
||
Cost Statement under Activities Based Costing
|
Particulars |
A = 6,000 |
B = 4,000 |
|
|
Direct materials |
|
|
|
|
Direct labour |
|
|
|
|
Prime cost (given) |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Set up cost |
[Production runs × Rs 3,000] |
18,000 |
12,000 |
|
MDC |
[Machine hours × Rs 4] |
48,000 |
16,000 |
|
Scheduling cost |
[Production runs × Rs 4,000] |
24,000 |
16,000 |
|
Total overhead |
Rs 90,000 |
Rs 44,000 |
|
|
Output |
6,000 |
4,000 |
|
|
Overhead per unit = Total overhead ÷ Output |
Rs 15 |
Rs 11 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2069, Q: 8 Or
An Industry, adopting activity based costing, is producing two products. The overhead costs incurred by the industry along with their cost drivers are as follows:
|
|
Amount (Rs) |
Cost driver |
|
Production set up cost |
30,000 |
Production run |
|
Machine department cost (MDC) |
40,000 |
Machine hours |
|
Selling and distribution cost |
20,000 |
Order execution |
|
Indirect labour cost |
50,000 |
DLH |
|
|
140,000 |
|
The output and other details of the products are as follows:
|
Products |
Output |
DLH |
MH |
Production |
Sales per |
Price cost |
|
|
Units |
Per unit |
Per unit |
run |
order |
per unit |
|
X |
20,000 |
3 |
3/4 |
40 |
400 units |
8 |
|
Y |
10,000 |
4 |
1/2 |
20 |
200 units |
5 |
Required: Total cost per unit of each products
[Answer:
SOLUTION:
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Production set up cost |
30,000 |
Production run |
60 |
500 |
|
Machine department cost (MDC) |
40,000 |
Machine hours |
20,000 |
2 |
|
Selling and distribution cost |
20,000 |
Order execution |
100 |
200 |
|
Indirect labour cost |
50,000 |
DLH |
100,000 |
0.5 |
Working note for total cost driver:
|
Production run |
Order execution = Output ÷ Order unit |
|||||||
|
= X + Y |
X = 20,000 ÷ 400 units |
= 50 |
||||||
|
= 40 + 20 |
Y = 10,000 ÷ 200 units |
= 50 |
||||||
|
= 60 |
|
= 100 |
||||||
|
|
|
|||||||
|
|
|
|||||||
|
Machine hours |
= Output × MHPU |
|
DLH |
= Output × DLH per unit |
|
|||
|
X |
= 20,000 × 3/4 |
= 15,000 |
X |
= 20,000 × 3 |
= 60,000 |
|||
|
Y |
= 10,000 × 1/2 |
= 5,000 |
Y |
= 10,000 × 4 |
= 40,000 |
|||
|
|
|
= 20,000 |
|
|
= 100,000 |
|||
|
|
|
|||||||
Cost Statement under Activities Based Costing
|
Particulars |
X = 20,000 |
Y = 10,000 |
|
|
Direct materials [Output × Price cost per unit] |
160,000 |
50,000 |
|
|
Direct labour {Output × LHPU × Rs] |
Nil |
Nil |
|
|
Prime cost |
160,000 |
50,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Production set up cost |
[Production run × Rs 500] |
20,000 |
10,000 |
|
MDC |
[Machine hours × Rs 2] |
20,000 |
10,000 |
|
S&D cost |
[Order execution × Rs 200] |
10,000 |
10,000 |
|
Indirect labour cost |
[DLH × Re 0.50] |
30,000 |
20,000 |
|
Total cost |
Rs 250,000 |
Rs 100,000 |
|
|
Output |
20,000 |
20,000 |
|
|
Cost per unit = Total overhead ÷ Output |
Rs 12.50 |
Rs 10.00 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2070, Q: 8
The relevant information of three products made by A Company for a period is given below:
|
|
Product X |
Product Y |
Product Z |
|
Output in units |
2,000 |
3,000 |
5,000 |
|
Direct labour hours per units |
1.5 |
1 |
0.8 |
|
Number of order executed |
5 |
2 |
3 |
|
Number of set ups |
2 |
2 |
3 |
The overhead costs and cost drivers are:
|
|
Cost driver |
Amount (Rs) |
|
Production set up cost |
Set ups |
14,000 |
|
Indirect labour |
Direct labour hours |
10,000 |
|
Materials handling and dispatch |
Order execution |
+ 6,000 |
|
|
|
30,000 |
Required: Total overhead costs for each product by using: (a) Direct labour hours; (b) Activity based costing
[Answer:
SOLUTION:
Cost Statement under Conventional Method
|
Particulars |
X |
Y |
Z |
|
Direct materials |
|
|
|
|
Direct labour |
|
|
|
|
Prime cost |
Nil |
Nil |
Nil |
|
Add: Overhead (based on LH; LH × LHR) |
9,000 |
9,000 |
12,000 |
|
Total overhead |
Rs 9,000 |
Rs 9,000 |
Rs 12,000 |
|
Output |
2,000 |
3,000 |
5,000 |
|
Cost per unit = Total overhead ÷ Output |
Rs 4.50 |
Rs 3.00 |
Rs 2.40 |
Given and working note:
|
Labour hours (LH) |
= Output × LHPU |
|
|
|
X |
= 2,000 × 1.5 |
= 3,000 |
|
|
Y |
= 3,000 × 1 |
= 3,000 |
|
|
Z |
= 5,000 × 0.8 |
= 4,000 |
|
|
|
Total |
10,000 |
|
|
|
|||
|
Labour hour rate (LHR) |
Order execution |
||
|
= Total overhead ÷ Total labour hours |
= X + Y + Z |
||
|
= Rs 30,000 ÷ 10,000 hours |
= 5 + 2 + 3 |
||
|
= Rs 3 |
= 10 |
||
|
|
|
||
|
Set ups |
|
||
|
= X + Y + Z |
|
||
|
= 2 + 2 + 3 |
|
||
|
= 7 |
|
||
|
|
|||
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver (CD) |
Total CD |
CD Rate |
|
Production set up cost |
14,000 |
Set ups |
7 |
2,000 |
|
Indirect labour |
10,000 |
Direct labour hours |
10,000 |
1 |
|
Materials handling and dispatch (MHD) |
6,000 |
Order execution |
10 |
600 |
Cost Statement under Activities Based Costing
|
Particulars |
X |
Y |
Z |
|
|
Direct materials |
|
|
|
|
|
Direct labour |
|
|
|
|
|
Prime cost |
Nil |
Nil |
Nil |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
|
Production set up cost |
[Set ups × Rs 2,000] |
4,000 |
4,000 |
6,000 |
|
Indirect labour |
[Direct labour hour × Re 1] |
3,000 |
3,000 |
4,000 |
|
MHD |
[Orders executed × Rs 600] |
3,000 |
1,200 |
1,800 |
|
Total overhead |
Rs 10,000 |
Rs 8,200 |
Rs 11,800 |
|
|
Output |
2,000 |
3,000 |
5,000 |
|
|
Cost per unit = Total overhead ÷ Output |
Rs 5 |
Rs 2.56 |
Rs 2.36 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2071, Q: 8 Or
An Industry, adopting activity based costing, is producing two products.
Detailed information are as follows:
|
Products |
Output |
Raw materials |
Labour hour |
Labour |
MH |
No. of product |
No. of |
No. of |
|
|
In units |
Per unit |
Per unit |
Hour rate |
Per unit |
Delivered |
Set ups |
Receipts |
|
P1 |
30,000 |
Rs 8 |
0.5 |
Rs 10 |
3 |
8 |
20 |
30 |
|
P2 |
20,000 |
Rs 6 |
0.5 |
Rs 10 |
2 |
5 |
15 |
20 |
Overhead cost
|
Set up cost |
Rs 7,000 |
|
Machine related cost |
Rs 65,000 |
|
Receiving cost |
Rs 20,000 |
|
Packing cost |
+ Rs 26,000 |
|
Total |
Rs 118,000 |
Required: Product cost per unit by using activity based costing method
[Answer: (a) Cost driver rate = 200; 0.5; 400; 2,000;
(b) Total overhead: P1 = Rs 467,000; P2 = Rs 261,000;
Overhead per unit: P1 = Rs 15.57; P2 = Rs 13.35]
SOLUTION:
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Set up cost |
7,000 |
No. of set ups |
35 |
200 |
|
Machine related cost |
65,000 |
Machine hours |
130,000 |
0.5 |
|
Receiving cost |
20,000 |
No. of receipt |
50 |
400 |
|
Packing cost |
26,000 |
No. of delivered |
13 |
2,000 |
Working note for total cost driver:
|
Set ups |
No. of receipts |
No. of product delivered |
||
|
= P1 + P2 |
= P1 + P2 |
= P1 + P2 |
||
|
= 20 + 15 |
= 30 + 20 |
= 8 + 5 |
||
|
= 35 |
= 50 |
= 13 |
||
|
|
||||
|
Machine hours |
= Output × MHPU |
|
||
|
P1 |
= 30,000 × 3 |
= 90,000 |
||
|
P2 |
= 20,000 × 2 |
= 40,000 |
||
|
|
|
= 130,000 |
||
|
|
||||
Cost Statement under Activities Based Costing
|
Particulars |
P1 = 30,000 |
P2 = 20,000 |
|
|
Direct materials [Output × RMPU] |
240,000 |
120,000 |
|
|
Direct labour {Output × LHPU × Rs 10] |
150,000 |
100,000 |
|
|
Prime cost |
390,000 |
220,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Set up cost |
[No. of set ups × Rs 200] |
4,000 |
3,000 |
|
Machine related cost |
[Machine hours × Re 0.5] |
45,000 |
20,000 |
|
Receiving cost |
[No. of receipt × Rs 400] |
12,000 |
8,000 |
|
Packing cost |
[No. of delivered × Rs 2,000] |
16,000 |
10,000 |
|
Total cost |
Rs 467,000 |
Rs 261,000 |
|
|
Output |
30,000 |
20,000 |
|
|
Cost per unit = Total overhead ÷ Output |
Rs 15.57 |
Rs 13.35 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2074, Q: 11
A Company produces three products A, B and C. all the products are produced on the same equipment and similar processes.
The information for the last period are given below:
|
Products |
Output units |
Labour hours Per unit |
Machine hours Per unit |
Materials cost Per unit |
Production runs |
|
A |
2,000 |
2 |
2 |
8 |
10 |
|
B |
4,000 |
3 |
2 |
10 |
30 |
|
C |
8,000 |
4 |
2 |
12 |
20 |
Direct labour cost per unit Rs 4
The overhead cost and cost driver are as follow:
|
Activities |
Cost |
Cost drivers |
|
Schedule cost |
Rs 90,000 |
Production runs |
|
Repair cost |
Rs 140,000 |
Machine hours |
|
Set up cost |
Rs 180,000 |
Production runs |
|
Indirect labour |
Rs 144,000 |
DLH |
|
|
Rs 554,000 |
|
Required: Cost per unit under (a) conventional method using machine hour; (b) activity based costing system
Given and working note:
|
Machine hours |
= Output × LHPU |
|
Machine hours rate (MHR) |
|
A |
= 2,000 × 2 |
= 4,000 |
= Total overhead ÷ Total machine hours |
|
B |
= 4,000 × 2 |
= 8,000 |
= Rs 554,000 ÷ 28,000 hours |
|
C |
= 8,000 × 2 |
= 16,000 |
= Rs 19.79 |
|
|
Total |
= 28,000 |
|
Cost Statement under Conventional Costing
|
Particulars |
Products |
||
|
|
A = 2,000 |
B = 4,000 |
C = 8,000 |
|
Direct materials [Output × MCPU] |
16,000 |
40,000 |
96,000 |
|
Direct labour [Output × LHPU × Rs 4] |
16,000 |
48,000 |
128,000 |
|
Prime cost |
32,000 |
88,000 |
224,000 |
|
Add: Overhead (based on labour hours): |
|
|
|
|
Machine expenses (MH × MHR) |
49,160 |
158,320 |
316,640 |
|
Total cost |
Rs 111,160 |
Rs 246,320 |
Rs 540,640 |
|
Output |
2,000 |
4,000 |
8,000 |
|
Cost per unit s = Total cost ÷ Output |
Rs 55.58 |
Rs 51.58 |
Rs 67.58 |
Calculation of Cost Driver Rate
|
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
|
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
|
Schedule cost |
90,000 |
Production runs |
60 |
1,500 |
|
Repair cost |
140,000 |
Machine hours |
28,000 |
5 |
|
Set up cost |
180,000 |
Production runs |
60 |
3,000 |
|
Indirect labour |
144,000 |
DLH |
48,000 |
3 |
Working note for total cost driver:
|
Labour hours |
= Output × LHPU |
|
|
Production runs |
|
A |
= 2,000 × 2 |
= 4,000 |
|
= A+ B + C |
|
B |
= 4,000 × 3 |
= 12,000 |
|
= 10 + 30 + 20 |
|
C |
= 8,000 × 4 |
= 32,000 |
|
= 60 |
|
|
|
= 48,000 |
|
|
|
|
|
|
||
Cost Statement under ABC
|
Particulars |
Products |
|||
|
|
A |
B |
C |
|
|
Direct materials [Output × RCPU] |
16,000 |
40,000 |
96,000 |
|
|
Direct labour [Output × LHPU × Rs 4] |
16,000 |
48,000 |
128,000 |
|
|
Prime cost |
32,000 |
88,000 |
224,000 |
|
|
Add: Overhead (based on ABC): |
|
|
|
|
|
Schedule cost |
[Production runs × Rs 1,500] |
15,000 |
45,000 |
30,000 |
|
Repair cost |
[Machine hours × Rs 5] |
20,000 |
40,000 |
80,000 |
|
Set up cost |
[Production runs × Rs 3,000] |
30,000 |
90,000 |
60,000 |
|
Indirect labour |
[DLH × Rs 3] |
12,000 |
36,000 |
96,000 |
|
Total cost |
Rs 109,000 |
Rs 299,000 |
Rs 490,000 |
|
|
Output |
2,000 |
4,000 |
8,000 |
|
|
Cost per unit s = Total cost ÷ Output |
Rs 54.50 |
Rs 74.75 |
Rs 61.25 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
2077, Q: 11
Following are the particulars of an industry manufacturing two products X and Y:
|
Products |
Output units |
Machine hours |
Production run |
No. of order |
Prime cost |
|
X |
15,000 |
2,000 |
20 |
60 |
Rs 110,000 |
|
Y |
20,000 |
3,000 |
40 |
90 |
Rs 90,000 |
The overhead cost and cost driver are as follow:
|
Activities |
Cost drivers |
Overheads |
|
Maintenance cost |
Machine hours |
Rs 250,000 |
|
Set up cost |
No. of production runs |
Rs 300,000 |
|
Procurement cost |
No. of order executed |
Rs 300,000 |
Required: Cost per unit under (a) conventional method using machine hour; (b) activity based costing system
[Answer: (a) Total cost X = Rs 450,000; Y = Rs 600,000; CPU: X = Rs 30; Y = Rs 30;
(b) Total cost X = Rs 430,000; Y = Rs 620,000; CPU: X = Rs 28.67; Y = Rs 31;
*MHR = Rs 170; *CDR: 50; 5,000; 2,000;
SOLUTION
Given and working note:
|
Total overhead = 250,000 + 300,000 + 300,000 = Rs 850,000 |
|
|
Total machine hours = 2,000 + 3,000 = 5,000 hours |
|
|
|
|
|
Machine hour rate (MHR) |
= Total overhead ÷ Total machine hours |
|
|
= Rs 850,000 ÷ 5,000 MH |
|
|
= Rs 170 |
|
|
|
Cost Statement under Conventional Method
|
Particulars |
X |
Y |
|
Direct materials |
|
|
|
Direct labour |
|
|
|
Prime cost (given) |
110,000 |
90,000 |
|
Add: Overhead (based on MH; MH × MHR) |
340,000 |
510,000 |
|
Total cost |
Rs 450,000 |
Rs 600,000 |
|
Output |
15,000 |
20,000 |
|
Cost per unit = Total overhead ÷ Output |
Rs 30 |
Rs 30 |
Given and working note for cost driver:
|
Machine hour = X + Y = 2,000 + 3,000 = 5,000 |
|
|
|
Production runs = X + Y = 20 + 40 = 60 |
|
|
|
No. of orders = X + Y = 60 + 90 = 150 |
|
|
Calculation of Cost Driver Rate
|
Activities |
Cost |
Cost Driver (CD) |
Total CD |
CD Rate |
|
Maintenance cost |
250,000 |
Machine hours |
5,000 |
50 |
|
Set up cost |
300,000 |
No. of production runs |
60 |
5,000 |
|
Procurement cost |
300,000 |
No. of order executed |
150 |
2,000 |
Cost Statement under Activities Based Costing
|
Particulars |
A |
B |
|
|
Direct materials |
|
|
|
|
Direct labour |
|
|
|
|
Prime cost (given) |
110,000 |
90,000 |
|
|
Add: Overhead (based on ABC) |
|
|
|
|
Materials cost |
[Machine hours × Rs 50] |
100,000 |
150,000 |
|
Set up cost |
[Production runs × Rs 5,000] |
100,000 |
200,000 |
|
Procurement cost |
[No. of orders × Rs 2,000] |
120,000 |
180,000 |
|
Total cost |
Rs 430,000 |
Rs 620,000 |
|
|
Output |
15,000 |
20,000 |
|
|
Cost per unit = Total overhead ÷ Output |
Rs 28.67 |
Rs 31 |
|
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Accounting for overhead, TU Solution
It contents numerical problems and solution with clear working notes.
There are production departments and service departments in manufacturing company.
Direct materials and direct labour are NOT recorded in production departments.
But, direct materials and direct labour are recorded in service departments.
There are three methods to calculate machine hour rate and labour hour rate.
They are Absorption of overhead, allocation of overhead in direct method and allocation of overhead in step method.
Concept of Overhead
All expenses other than direct expenses and production are overhead.
It is an aggregate of all indirect materials, indirect wages and indirect expenses.
Another name for overhead are on cost, burden cost, indirect expenses, non-productive cost, supplementary cost, logistic support cost and loading cost etc.
Definition of overhead
According to Institute of Cost and Management Account (ICMA, London), “Overhead is an aggregate of indirect materials, indirect wages and indirect expenses.”
Overheads represent fixed costs and relate to general business functions.
These costs still remain if production is shut down for a short period of time.
Some major overheads are:
Administrative overhead
General business overhead
Research overhead
Transportation overhead
Manufacturing overhead
Marketing overhead
Selling and promotional overhead etc.
(1) Absorption of Overhead
Absorption means charging or sharing overhead to different cost units.
In other words, charging or sharing overhead to specific product or individual units is known absorption.
Generally, following methods are applied in absorption:
Production unit method | Cost per unit of output
Percentage of direct materials cost
Percentage of direct labour cost
Percentage of prime cost
Labour hour rate
Machine hour rate
(2) Allocation of Overhead | Direct Distribution Method
Under this method, the costs of service department are NOT distributed or apportioned to production department.
Overcharge and under charge is ignored in this method.
According to this method, the rate of overhead equals the total costs of the enterprise expressed as a fraction of the direct material costs.
Rate of overhead = Total overhead costs ÷ Total direct material cost
This method has the serious drawback that values of materials used in different items of manufacture may vary widely.
(3) Allocation of Overhead | Step Method
Under step method of secondary distribution, the costs of service department are distributed or apportioned to production department step by step or one by one.
This redistribution may in percentage or ratio.
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Allocation of Overhead | Step Method
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2054, Q: 6
A Manufacturing Company has following departments where working 8 hours a day for 25 working days in a month, reporting department’s total cost, allocation of service department cost:
|
Activities |
Total |
Service Dept |
Production |
||
|
|
|
(Workshop) |
A |
B |
|
|
No of workers |
50 |
10 |
15 |
25 |
|
|
Space occupied in square feet |
100 |
20 |
20 |
60 |
|
|
Service received by production departments (in %) |
100 |
— |
40 |
60 |
|
|
Supervisor’s salary |
(Rs /₹/Rs) |
13,000 |
2,000 |
5,000 |
6,000 |
|
Power and lighting |
(Rs /₹/Rs) |
1,000 |
300 |
300 |
400 |
|
Rent |
(Rs /₹/Rs) |
5,000 |
|
|
|
|
Welfare |
(Rs /₹/Rs) |
1,000 |
|
|
|
Required: (a) Total overhead; (b) Labour hour rate
[Answer: Total overhead: Service = Rs 3,500; A = Rs 8,000; B = Rs 12,000;
LHR: A = Rs 2.67; B = Rs 2.40; *TLH = No. of worker x 25 days x 8 hours
SOLUTION
Calculation of Total overhead
|
Expenditure head |
Basis and ratio |
Total |
Service |
Production |
||
|
|
|
|
department |
A |
B |
|
|
Supervisor’s salary |
Direct |
|
13,000 |
2,000 |
5,000 |
6,000 |
|
Power and lighting |
Direct |
|
1,000 |
300 |
300 |
400 |
|
Rent |
Space |
20:20:60 |
5,000 |
1,000 |
1,000 |
3,000 |
|
Welfare |
No. of workers |
10:15:25 |
1,000 |
200 |
300 |
500 |
|
Total |
20,000 |
3,500 |
6,600 |
9,900 |
||
|
Allocation service department to PA and PB in 40:60 |
Nil |
(3,500) |
1,400 |
2,100 |
||
|
Total overhead |
20,000 |
Nil |
8,000 |
12,000 |
||
|
Total hours |
– |
|
3,000 |
5,000 |
||
|
Labour hours rate = Total overhead ÷ Total hours |
|
|
Rs 2.67 |
Rs 2.40 |
||
Given and working note:
|
Total labour hours |
= No. of workers x 8 hours x 25 days |
|
|
Production department A |
= 15 x 8 x 25 |
= 3,000 hours |
|
Production department B |
= 25 x 8 x 25 |
= 5,000 hours |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2060 II, Q: 8
A Manufacturing Company has three production departments A, B and C and one serve department S. The following information is available regarding various expenses:
|
Rent |
Rs 30,000 |
|
Canteen expenses |
Rs 3,000 |
|
Indirect wages |
Rs 11,000 |
|
Depreciation on machinery . |
Rs 20,000 |
|
Power |
Rs 15,000 |
|
Electricity |
Rs 6,000 |
The following further details are available:
|
Departments |
A |
B |
C |
S |
|
Direct wages (Rs) |
20,000 |
15,000 |
15,000 |
5,000 |
|
Floor area (square meter) |
4,000 |
3,000 |
2,000 |
1,000 |
|
Light points |
9 |
7 |
8 |
6 |
|
Cost of machine (Rs) |
100,000 |
50,000 |
40,000 |
10,000 |
|
Horse power ratio |
4 |
3 |
2 |
1 |
|
Number of workers |
50 |
50 |
40 |
10 |
Service rendered by the service department to production department A, B and C is in the ratio of 2:2:1
Required: Statement showing the overhead distribution
[Answer: A = Rs 39,960; B = Rs 29,060; C = Rs 20,980; Service Rs 12,900 in 2:2:1
*Direct wages is written only in service department
SOLUTION
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions |
Service |
|||
|
|
|
|
A |
B |
C |
|
|
|
Direct wages |
Direct |
|
5,000 |
– |
– |
– |
5,000 |
|
Rent |
Space/area |
4:3:2:1 = 10 |
30,000 |
12,000 |
9,000 |
6,000 |
3,000 |
|
Indirect wages |
Direct wages |
4:3:3:1 = 11 |
11,000 |
4,000 |
3,000 |
3,000 |
1,000 |
|
Power |
HP |
4:3:2:1 = 10 |
15,000 |
6,000 |
4,500 |
3,000 |
1,500 |
|
Canteen expenses |
No. of workers |
5:5:4:1 = 15 |
3,000 |
1,000 |
1,000 |
800 |
200 |
|
Depn on machine |
Cost of mach. |
10:5:4:1 = 20 |
20,000 |
10,000 |
5,000 |
4,000 |
1,000 |
|
Electricity |
Light point |
9:7:8:6 = 30 |
6,000 |
1,800 |
1,400 |
1,600 |
1,200 |
|
Total overhead |
90,000 |
34,800 |
23,900 |
18,400 |
12,900 |
||
|
Service rendered to production Rs 12,900 in 2:2:1 |
Nil |
5,160 |
5,160 |
2,580 |
(12,900) |
||
|
Total overhead |
90,000 |
39,960 |
29,060 |
20,980 |
Nil |
||
######
|
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|
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|
|
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|
Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cashbook |
|
|
Trial Balance and Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
|
|
|
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Analysis of Financial Statement |
|
######
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2061, Q: 7
In ABC Manufacturing Company there are two production departments P1 and P2 two service departments S1, and S2 following are the particulars of month of 25 working days of 8 hours each.
|
Departments |
P1 |
P2 |
S1 |
S2 |
|
Direct wages (Rs ) |
40,000 |
30,000 |
20,000 |
10,000 |
|
Value of plant (Rs ) |
200,000 |
150,000 |
100,000 |
50,000 |
|
Area (square meter) |
5,000 |
4,000 |
3,000 |
2,000 |
|
Number of light points |
10 |
8 |
7 |
5 |
|
Horse power of plant |
50 |
40 |
30 |
10 |
|
Number of workers |
20 |
25 |
30 |
15 |
Total expenses of service departments S1 and S2 are apportioned in the ratio of 3:2 to departments P1 and P2 respectively. The expenses for the month were:
|
Indirect wages |
Rs 20,000 |
|
Rent |
Rs 28,000 |
|
Power |
Rs 10,400 |
|
Depreciation on plant |
Rs 5,000 |
|
Lighting |
Rs 6,000 |
|
|
|
Required: (a) Overhead distribution statements; (b) Labour hour rate for each of the production department
[Answer: Service S1 = Rs 38,400 and S2 = Rs 18,300 in 3:2
Total overhead: P1 = Rs 57,860; P2 = Rs 41,540; LHR: P1= Rs 14.47; P2 = Rs 8.31]
SOLUTION:
Note: Direct wages is written only in service department
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions |
Service |
|||
|
|
|
|
P1 |
P2 |
S1 |
S2 |
|
|
Direct wages |
Direct |
– |
30,000 |
– |
– |
20,000 |
10,000 |
|
Indirect wages |
Direct wages |
4:3:2:1 = 10 |
20,000 |
8,000 |
6,000 |
4,000 |
2,000 |
|
Lighting |
Light point |
10:8:7:5 = 30 |
6,000 |
2,000 |
1,600 |
1,400 |
1,000 |
|
Power |
Horse Power |
5:4:3:1 = 13 |
10,400 |
4,000 |
3,200 |
2,400 |
800 |
|
Rent |
Area/m2 |
5:4:3:2 = 14 |
28,000 |
10,000 |
8,000 |
6,000 |
4,000 |
|
Depreciation |
Value of mach. |
4:3:2:1 = 10 |
5,000 |
2,000 |
1,500 |
1,000 |
500 |
|
Total |
99,400 |
26,000 |
20,300 |
34,800 |
18,300 |
||
|
Service rendered of S1 to P1 and P2 in 3:2 |
Nil |
20,880 |
13,920 |
(34,800) |
– |
||
|
Service rendered of S2 to P1 and P2 in 3:2 |
Nil |
10,980 |
7,320 |
– |
(18,300) |
||
|
Total overhead |
99,400 |
57,860 |
41,540 |
Nil |
Nil |
||
|
Labour hours |
– |
4,000 |
5,000 |
– |
– |
||
|
LHR = Total overhead ÷ Labour hours |
– |
Rs 14.47 |
Rs 8.31 |
|
|
||
Given and working note:
|
Total labour hours |
= No. of workers x 8 hours x 25 days |
|
|
Production P1 |
= 20 x 8 x 25 |
= 4,000 hours |
|
Production P2 |
= 25 x 8 x 25 |
= 5,000 hours |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2061, II, Q: 7 Or
The extracts out of the expenditure related to machine are given below (amount in Rs /₹/Rs):
Miscellaneous overhead related to machine Rs 12,000
Maintenance of plant Rs 40,000
Rent Rs 28,000
Power Rs 48,000
The operating positions of assembly finishing and store units are provided below (amount in Rs /₹/Rs):
|
|
Assembly unit |
Finishing unit |
Store unit |
|
Cost of plant in Rs |
400,000 |
300,000 |
100,000 |
|
Machine hour in operation |
32,000 |
20,000 |
8,000 |
|
Space covered in (square meter) |
8,000 |
5,000 |
1,000 |
Required: (1) Primary distribution of overheads
(2) Total overhead after re-apportioning the cost of store in the ratio of 1:1; (3) Overhead per machine hour
[Answer: (1) Primary overhead = Rs 68,000; Rs 45,000 and Rs 15,000;
(2) Total overhead = Rs 75,500 and Rs 52,500; (3) MHR = Rs 2.36 and Rs 2.63]
SOLUTION
Primary Distribution of Overhead
|
Particulars / expenses |
Basis and ratio |
Total |
Assembly |
Finishing |
Store |
|
|
Miscellaneous expenses |
MH |
8:5:2 = 15 |
12,000 |
6,400 |
4,000 |
1,600 |
|
Maintenance of plant |
Cost of plant |
4:3:1 = 8 |
40,000 |
20,000 |
15,000 |
5,000 |
|
Rent |
Space |
8:5:1 = 14 |
28,000 |
16,000 |
10,000 |
2,000 |
|
Power |
MH |
8:5:2 = 15 |
48,000 |
25,600 |
16,000 |
6,400 |
|
Primary distribution of overhead |
128,000 |
68,000 |
45,000 |
15,000 |
||
|
Store’s amount transfer to assembly and finishing in 1:1 |
Nil |
7,500 |
7,500 |
(15,000) |
||
|
Total overhead |
128,000 |
Rs 75,500 |
Rs 52,500 |
Nil |
||
|
Machine hours |
– |
32,000 |
32,000 |
– |
||
|
Machine hours rate = Total overhead ÷ Machine hour |
– |
Rs 2.36 |
Rs 2.63 |
– |
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2062, Q: 7
The expenses of Apparel Garment Factory are given below: (amount in Rs /₹/Rs)
Welfare and cafeteria Rs 60,000
Fuel Rs 75,000
Rent and lighting Rs 30,000
Insurance and tax of properties Rs 25,000
The other necessary particulars are as follows: (amount in Rs /₹/Rs)
|
Particulars |
Processing I |
Processing II |
Service unit |
|
Number of staff |
20 |
15 |
5 |
|
Area used in square meter |
3,500 |
2,000 |
500 |
|
Value of properties |
10,00,000 |
8,00,000 |
2,00,000 |
|
Machine hours |
16,000 |
9,000 |
— |
The service unit has provided service to processing unit I and unit II In the ratio of 3.2
Required: (a) Overhead distribution summary; (b) Overhead per machine hour after apportioning the cost of service unit
[Answer: Total overhead: Service = Rs 12,500 in 3:2;
PI = Rs 115,500 and P II = Rs 74,500; MHR: PI = Rs 7.22 and PII = Rs 8.28]
SOLUTION
Overhead Distribution Summary
|
Particulars / expenses |
Basis and ratio |
Total |
Processing |
Service |
||
|
|
|
|
1 |
2 |
|
|
|
Welfare and cafeteria |
No. of staff |
4:3:1 = 8 |
60,000 |
30,000 |
22,500 |
7,500 |
|
Fuel |
Mach. Hours |
16:9 = 25 |
75,000 |
48,000 |
27,000 |
– |
|
Rent and lighting |
Area/m2 |
7:4:1 = 12 |
30,000 |
17,500 |
10,000 |
2,500 |
|
Interest and tax |
Value of property |
5:4:1 = 10 |
25,000 |
12,500 |
10,000 |
2,500 |
|
Total |
190,000 |
108,000 |
69,500 |
12,500 |
||
|
Service amount transfer to P1 and P2 in 3:2 |
Nil |
7,500 |
5,000 |
(12,500) |
||
|
Total overhead |
Rs 190,000 |
Rs 115,500 |
Rs 74,500 |
Nil |
||
|
Machine hours |
– |
16,000 |
9,000 |
– |
||
|
Machine hours rate = Total overhead ÷ Machine hour |
– |
Rs 7.22 |
Rs 8.28 |
– |
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2069, Q: 8
The expenditures are extracted from the book of A Factory are as under:
|
Motive power |
Rs 20,000 |
Depreciation |
Rs 30,000 |
|
Lighting power |
Rs 7,000 |
Repairs and maintenance |
Rs 6,000 |
|
Amenities to staff |
Rs 20,000 |
Rent |
Rs 32,000 |
The factory has three production departments (PD) and one service department (SD).
The operating positions of three departments are provided below:
|
|
PD1 |
PD2 |
PD3 |
SD |
|
Light points |
10 |
15 |
5 |
5 |
|
No. of employees |
100 |
150 |
100 |
50 |
|
Areas occupied in square meter |
400 |
600 |
500 |
100 |
|
Electricity (kW) |
4,000 |
3,000 |
2,000 |
1,000 |
|
Assets value |
Rs 140,000 |
Rs 60,000 |
Rs 60,000 |
Rs 20,000 |
|
Machine operating hours |
5,000 |
3,000 |
3,500 |
– |
|
Service rendered by service department |
50% |
20% |
30% |
– |
Required: (a) Overhead analyses sheet by showing total overhead rate per hour
[Answer: Total overhead: PD1 = Rs 44,359; PD2 = Rs 39,965; PD3 = Rs 32,676;
Service department = Rs 9,500 rendered in in 50%: 20%: 30%]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Department |
Service |
|||
|
|
|
|
PD1 |
PD2 |
PD3 |
SD |
|
|
Motive power |
kW |
4:3:2:1 = 10 |
20,000 |
8,000 |
6,000 |
4,000 |
2,000 |
|
Lighting power |
Light points |
2:3:1:1 = 7 |
7,000 |
2,000 |
3,000 |
1,000 |
1,000 |
|
Amenities to staff |
No. of employees |
2:3:2:1 = 8 |
20,000 |
5,000 |
7,500 |
5,000 |
2,500 |
|
Depreciation |
Assets value |
14:6:6:2 = 28 |
30,000 |
14,000 |
8,000 |
8,000 |
2,000 |
|
Repairs and maint. |
MH |
50:30:35 = 115 |
6,000 |
2,609 |
1,565 |
1,826 |
0 |
|
Rent |
Areas occupied |
4:6:5:1 = 16 |
32,000 |
8,000 |
12,000 |
10,000 |
2,000 |
|
Total |
115,000 |
39,609 |
38,065 |
29,826 |
9,500 |
||
|
Service rendered of SD to PD1, PD2, PD3 in 50%: 20%: 30% |
0 |
4,750 |
1,900 |
2,850 |
(9,500) |
||
|
Total overhead |
Rs 150,000 |
Rs 44,359 |
Rs 39,965 |
Rs 32,676 |
0 |
||
|
Machine hours |
|
5,000 |
3,000 |
3,500 |
|
||
|
MHR = Total overhead ÷ Machine hours |
|
Rs 8.87 |
Rs 13.32 |
Rs 8.76 |
|
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2072, Old, Q: 8
The overhead expenditures of A Manufacturing Company extracted from its records are given below:
|
Repairs |
Rs 5,000 |
Power |
Rs 4,000 |
|
Supervision |
Rs 10,000 |
Rent |
Rs 12,000 |
|
Light |
Rs 6,000 |
Depreciation |
Rs 15,000 |
The company has three production departments namely X, Y and Z and one service department (SD). The other details of departments are as under:
|
Particulars |
PDX |
PDY |
PDZ |
SD |
|
Assets value |
Rs 20,000 |
Rs 10,000 |
Rs 10,000 |
Rs 10,000 |
|
No. of workers |
10 |
20 |
10 |
10 |
|
Area in square meter |
200 |
100 |
100 |
200 |
|
Horse power (HP) of machine |
500 |
200 |
100 |
200 |
|
Machine operating hours |
4,000 |
2,000 |
2,000 |
– |
|
Service rendered by service department |
40% |
30% |
30% |
– |
Required: (a) Apportionment overhead cost to the department; (b) Overhead rate per machine hour
[Answer: Total: X = Rs 18,000; Y = Rs 11,800; Z = Rs 9,400; S = Rs 12,800;
Total overhead: X = Rs 23,120; Y = Rs 15,640; Z = Rs 13,240;
MHR: X= Rs 5.78; Y = Rs 7.82; Z = Rs 6.62]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Department |
Service |
|||
|
|
|
|
PDX |
PDY |
PDZ |
SD |
|
|
Repairs |
Assets value |
2:1:1:1 |
5,000 |
2,000 |
1,000 |
1,000 |
1,000 |
|
Supervision |
No. of workers |
1:2:1:1 |
10,000 |
2,000 |
4,000 |
2,000 |
2,000 |
|
Light |
Area |
2:1:1:2 |
6,000 |
2,000 |
1,000 |
1,000 |
2,000 |
|
Power |
HP |
5:2:1:2 |
4,000 |
2,000 |
800 |
400 |
800 |
|
Rent |
Area |
2:1:1:2 |
12,000 |
4,000 |
2,000 |
2,000 |
4,000 |
|
Depreciation |
Assets value |
2:1:1:1 |
15,000 |
6,000 |
3,000 |
3,000 |
3,000 |
|
Total |
53,000 |
18,000 |
11,800 |
9,400 |
12,800 |
||
|
Service rendered of SD to PD1, PD2, PD3 in 40%: 30%: 30% |
Nil |
5,120 |
3,840 |
3,840 |
(12,800) |
||
|
Total overhead |
Rs 53,000 |
Rs 23,120 |
Rs 15,640 |
Rs 13,240 |
Nil |
||
|
Machine hours |
|
4,000 |
2,000 |
2,000 |
|
||
|
MHR = Total overhead ÷ Machine hours |
|
Rs 5.78 |
Rs 7.82 |
Rs 6.62 |
|
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2072, Q: 11
XYZ Manufacturing Company having three production departments namely A, B and C and two service departments X and Y. The operating condition of the departments are as given below:
|
Particulars |
Production Departments |
Service Departments |
|||
|
|
A |
B |
C |
X |
Y |
|
Direct materials (Rs) |
2,000 |
3,000 |
4,000 |
2,500 |
1,500 |
|
Direct wages (Rs) |
6,000 |
4,000 |
3,000 |
1,600 |
2,500 |
|
Area in square meter |
400 |
300 |
500 |
300 |
500 |
|
Capital in value of assets (Rs in Lakhs) |
30 |
40 |
15 |
5 |
10 |
|
Light points |
20 |
20 |
30 |
10 |
10 |
|
Service rendered by service departments |
40% |
30% |
30% |
– |
– |
|
Machine hours |
100 |
120 |
110 |
– |
– |
The overhead extracted from the book of the company are as follows:
Building rent Rs 12,000
Depreciation Rs 10,000
Store overhead Rs 26,000
Lighting Rs 2,700
Required: (a) A statement showing overheads distribution to productions and service departments
(b) Machine hour rate of the production departments
[Answer: Total: A = Rs 10,000; B = Rs 12,400; C= Rs 13,400; X = Rs 11,600; Y = Rs 11,300;
Total overhead: A = Rs 19,160; B = Rs 19,270; C= Rs 20,270;
MHR: A= Rs 191.60; B = Rs 160.58; C = Rs 184.27]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Departments |
Services |
||||
|
|
|
|
A |
B |
C |
X |
Y |
|
|
Direct materials |
Direct |
|
4,000 |
|
|
|
2,500 |
1,500 |
|
Direct wages |
Direct |
|
4,100 |
|
|
|
1,600 |
2,500 |
|
Building rent |
Area |
4: 3: 5: 3: 5 |
12,000 |
2,400 |
1,800 |
3,000 |
1,800 |
3,000 |
|
Depreciation |
Value of assets |
30: 40: 15: 5: 10 |
10,000 |
3,000 |
4,000 |
1,500 |
500 |
1,000 |
|
Store overhead |
Direct materials |
2: 3: 4: 2.5: 1.5 |
26,000 |
4,000 |
6,000 |
8,000 |
5,000 |
3,000 |
|
Lighting |
Light points |
2: 2: 3: 1: 1 |
2,700 |
600 |
600 |
900 |
300 |
300 |
|
Total |
58,700 |
10,000 |
12,400 |
13,400 |
11,600 |
11,300 |
||
|
Service rendered in 40%: 30%: 30% |
Nil |
4,640 |
3,480 |
3,480 |
(11,600) |
Nil |
||
|
Service rendered in 40%: 30%: 30% |
Nil |
4,520 |
3,390 |
3,390 |
Nil |
(11,300) |
||
|
Total overhead |
Rs 58,700 |
Rs 19,160 |
Rs 19,270 |
Rs 20,270 |
|
|
||
|
Machine hours |
|
100 |
120 |
110 |
|
|
||
|
MHR = Total overhead ÷ Machine hours |
|
Rs 191.60 |
Rs 160.58 |
Rs 184.27 |
|
|
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2073, Q: 11
Ratna Company Ltd is a factory with three production departments P, Q, R and two service departments X and Y
Overhead for the period are as follows:
|
Electric light |
Rs 6,400 |
Power |
Rs 20,000 |
|
Salary |
Rs 34,000 |
Depreciation |
Rs 26,000 |
|
Factory rent |
Rs 23,000 |
General overhead |
Rs 17,000 |
Other information is available:
|
Particulars |
Production Departments |
Service Departments |
|||
|
|
P |
Q |
R |
X |
Y |
|
Direct materials (Rs) |
60,000 |
40,000 |
30,000 |
20,000 |
20,000 |
|
Direct labour (Rs) |
30,000 |
20,000 |
15,000 |
10,000 |
10,000 |
|
Machine hours |
5,000 |
4,000 |
2,500 |
– |
– |
|
Light points |
10 |
8 |
8 |
4 |
4 |
|
Horse power (HP) |
20 |
12 |
6 |
1 |
1 |
|
Area in square meter |
400 |
300 |
200 |
100 |
150 |
|
Value of plant (Rs in Lakhs) |
6 |
4 |
3 |
– |
– |
|
Service rendered by service departments |
40% |
30% |
30% |
– |
– |
Required: (a) Overheads cost for each production departments; (b) Machine hour rate of the production departments
[Answer: Total: P = Rs 50,000; Q = Rs 33,600; R= Rs 23,200; X = Rs 39,300; Y = Rs 40,300;
Total overhead: P = Rs 81,840; Q = Rs 57,480; R = Rs 47,080;
MHR: P = Rs 16.37; Q = Rs 14.37; R = Rs 23.54]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Departments |
Services |
||||
|
|
|
|
P |
Q |
R |
X |
Y |
|
|
Direct materials |
Direct |
|
40,000 |
– |
– |
– |
20,000 |
20,000 |
|
Direct labour |
Direct |
|
20,000 |
– |
– |
– |
10,000 |
10,000 |
|
Electric light |
Light points |
10: 8: 8: 4: 4 |
6,400 |
2,000 |
1,600 |
1,200 |
800 |
800 |
|
Salary |
Direct labour |
3: 2: 1.5: 1: 1 |
34,000 |
12,000 |
8,000 |
6,000 |
4,000 |
4,000 |
|
Factory rent |
Area |
4: 3: 2: 1: 1.5 |
23,000 |
8,000 |
6,000 |
4,000 |
2,000 |
3,000 |
|
Power |
Horse power |
20: 12: 6: 1: 1 |
20,000 |
10,000 |
6,000 |
3,000 |
500 |
500 |
|
Depreciation |
Value of assets |
6: 4: 3: 0: 0 |
26,000 |
12,000 |
8,000 |
6,000 |
0 |
0 |
|
General overhead |
Direct labour |
3: 2: 1.5: 1: 1 |
17,000 |
6,000 |
4,000 |
3,000 |
2,000 |
2,000 |
|
Total |
186,000 |
50,000 |
33,600 |
23,200 |
39,300 |
40,300 |
||
|
Service rendered in 40%: 30%: 30% |
Nil |
15,720 |
11,790 |
11,790 |
(39,300) |
Nil |
||
|
Service rendered in 40%: 30%: 30% |
Nil |
16,120 |
12,090 |
12,090 |
Nil |
(40,300) |
||
|
Total overhead |
186,000 |
Rs 81,840 |
Rs 57,480 |
Rs 47,080 |
Nil |
Nil |
||
|
Machine hours |
|
5,000 |
4,000 |
2,500 |
|
|
||
|
MHR = Total overhead ÷ Machine hours |
|
Rs 16.37 |
Rs 14.37 |
Rs 23.54 |
|
|
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2075, Q: 11
Pokhara Factory has three production departments and one service department. Other details are as follows:
|
Particulars |
Production Departments |
Service |
||
|
|
A |
B |
C |
S |
|
Direct materials (Rs) |
20,000 |
30,000 |
20,000 |
5,000 |
|
Direct wages (Rs) |
25,000 |
20,000 |
15,000 |
5,000 |
|
Labour hours |
3,000 |
2,000 |
2,000 |
– |
|
Area in square meter |
400 |
300 |
200 |
100 |
|
Light points |
5 |
3 |
2 |
2 |
|
Horse power (HP) |
8 |
3 |
2 |
1 |
|
Fixed assets value of plant (Rs in Lakhs) |
10 |
5 |
3 |
2 |
|
Service rendered by service departments |
50% |
30% |
20% |
– |
Overhead for the period are as follows:
|
Rent |
Rs 10,000 |
Depreciation |
Rs 20,000 |
|
Electric light |
Rs 12,000 |
General overhead |
Rs 13,000 |
|
Power |
Rs 15,000 |
|
|
Required: (a) Total overheads of each production department; (b) Labour hour rate of the production departments
[Answer: Total: A = Rs 31,500; B = Rs 18,750; C= Rs 12,500; S = Rs 17,250;
Total overhead: A = Rs 40,125; B = Rs 23,925; C = Rs 15,950;
MHR: A = Rs 11.38; B = Rs 11.96; C = Rs 7.98]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Department |
Service |
|||
|
|
|
|
A |
B |
C |
S |
|
|
Direct materials |
Direct |
|
5,000 |
– |
– |
– |
5,000 |
|
Direct wages |
Direct |
|
5,000 |
– |
– |
– |
5,000 |
|
Rent |
Area |
4: 3: 2: 1 |
10,000 |
4,000 |
3,000 |
2,000 |
1,000 |
|
Electric light |
Light points |
5: 3: 2: 2 |
12,000 |
5,000 |
3,000 |
2,000 |
2,000 |
|
Power |
HP |
8: 3: 2: 1 |
15,000 |
7,500 |
3,750 |
2,500 |
1,250 |
|
Depreciation |
Assets value |
10: 5: 3: 2 |
20,000 |
10,000 |
5,000 |
3,000 |
2,000 |
|
General overhead |
Direct wages |
25: 20: 15: 5 |
13,000 |
5,000 |
4,000 |
3,000 |
1,000 |
|
Total |
80,000 |
31,500 |
18,750 |
12,500 |
17,250 |
||
|
Service rendered of A, B, C in 50%: 30%: 20% |
Nil |
8,625 |
5,175 |
3,450 |
(17,250) |
||
|
Total overhead |
Rs 80,000 |
Rs 40,125 |
Rs 23,925 |
Rs 15,950 |
Nil |
||
|
Machine hours |
|
3,000 |
2,000 |
2,000 |
|
||
|
MHR = Total overhead ÷ Machine hours |
|
Rs 13.38 |
Rs 11.96 |
Rs 7.98 |
|
||
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2075, Q: 11
A Manufacturing has three production departments A, B and C and one service department S.
The following information is available regarding various expenses.
|
Rent |
Rs 30,000 |
Canteen expenses |
Rs 4,000 |
|
Power |
Rs 30,000 |
Indirect wages |
Rs 17,000 |
|
Depreciation |
Rs 25,000 |
Electricity |
Rs 8,000 |
The following further details are available:
|
Particulars |
Production Departments |
Service |
||
|
|
A |
B |
C |
S |
|
Direct materials (Rs) |
40,000 |
40,000 |
30,000 |
10,000 |
|
Direct wages (Rs) |
20,000 |
20,000 |
15,000 |
5,000 |
|
Flour area in square meter |
5,000 |
4,000 |
4,000 |
6,000 |
|
Light points |
10 |
8 |
8 |
6 |
|
Cost of machines (Rs) |
100,000 |
80,000 |
60,000 |
30,000 |
|
Horse power (HP) |
5 |
4 |
4 |
2 |
|
No. of workers |
60 |
60 |
50 |
30 |
Required: Total overheads of each production department
[Answer: Total: A = Rs 37,700; B = Rs 29,200; C= Rs 28,000; S = Rs 29,100;
Total overhead: A = Rs 49,340; B = Rs 40,840; C = Rs 33,820]
SOLUTION:
Statement Showing the Overhead Distribution
|
Particulars |
Basis and ratio |
Total |
Productions Department |
Service |
|||
|
|
|
|
A |
B |
C |
S |
|
|
Direct materials |
Direct |
|
10,000 |
– |
– |
– |
10,000 |
|
Direct wages |
Direct |
|
5,000 |
– |
– |
– |
5,000 |
|
Rent |
Area |
5: 4: 4: 2 |
30,000 |
10,000 |
18,000 |
8,000 |
4,000 |
|
Power |
HP |
5: 4: 4: 2 |
30,000 |
10,000 |
18,000 |
8,000 |
4,000 |
|
Depreciation |
Assets value |
10: 6: 6: 3 |
25,000 |
10,000 |
6,000 |
6,000 |
3,000 |
|
Canteen amenities |
No. of workers |
8: 6: 5: 3 |
4,000 |
1,200 |
1,200 |
1,000 |
600 |
|
Indirect wages |
Direct wages |
4: 4: 3: 1 |
12,000 |
4,000 |
4,000 |
3,000 |
1,000 |
|
Electricity |
Light points |
5: 4: 4: 3 |
8,000 |
2,500 |
2,000 |
2,000 |
1,500 |
|
Total |
124,000 |
37,700 |
29,200 |
28,000 |
29,100 |
||
|
Service rendered to A, B, C in 2: 2: 1 |
Nil |
11,640 |
11,640 |
5,820 |
(29,100) |
||
|
Total overhead |
124,000 |
Rs 49,340 |
Rs 40,840 |
Rs 33,820 |
Nil |
||
|
Machine hours |
|
|
|
|
|
||
|
MHR = Total overhead ÷ Machine hours |
|
|
|
|
|
||
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